Enterprise risk management a necessity for accountants: IFAC
During an ever-changing business landscape due to factors including new technology and fluctuating markets, accountants need to recognize the importance of enterprise risk management within their organizations, according to a new report published by the International Federation of Accountants.
The report, titled "Enabling the Accountant's Role in Effective Enterprise Risk Management," urges professionals to play a larger role within their businesses "not solely to mitigate risk, but to promote and facilitate effective risk and opportunity management in support of value creation and preservation over time." According to the report, professionals can contribute to ERM within their organizations with "a deep understanding of the business," "enhanced quantitative and statistics skills," and "the ability to lead and communicate across teams."
The advice comes at a time when risk management could be a low priority for some organizations. A 2018 survey of mostly US businesses, conducted by North Carolina State University and the American Institute of CPAs, found that less than 20 percent of organizations see strategy or objectives in their risk processes, with another 69 percent of organizations admitting to not having a complete ERM process.
“This is a particularly uncertain time for businesses as the global economy experiences heightened volatility and rapid change," stated IFAC CEO Kevin Dancey. "In this environment, proper risk management will be increasingly important for organizations to ensure their resiliency and success over the long term. Professional accountants are well positioned to better serve the organizations they work for by enabling effective enterprise risk management that identifies both risks and opportunities for the business.”
The report urges chief financial officers and finance functions to "ensure that ERM sits at the heart of not only every organization, but also the professional accountant skill set" via three strategies:
- Align risk management with value creation and preservation;
- Drive insights and enable decisions through provision of risk modeling and analytics, data governance and identification of organizational risk appetite; and
- Enable integration and interconnectivity by breaking down siloes across the organization to share information.
For the full report, head to IFAC's site here.