How to Proactively Manage your Reputation Risk

According to Deloitte’s 2014 Global Survey on Reputation Risk “88% of executives say their companies are explicitly focusing on managing reputation risk.” Are you one of them? Do you know which particular “reputation risk” ranked the highest of all survey respondents?

“Ethics/Integrity (fraud, bribery, corruption)” was the number one risk concern among survey respondents. “Financial (reporting/accounting issue, credit rating)” risk was high on the list as well.

Many of us are. With social media and instant global communications, it is virtually impossible to keep unfortunate events private. Our global reputations can be damaged in real-time based on one isolated, localized incident due to social media accessibility by the world’s populations.

Deloitte’s survey states “39 percent rate the maturity of their reputation risk programs as “average” or “below average” and only 19 percent give themselves an “A” grade for their capabilities at managing reputation risk.”

As accountants, lets take one major risk off the table. With today’s software tools in Finance Controls and Automation, the “Financial (reporting/accounting issue, credit rating)” risk should not rank high on the list anymore. When you adopt the concept of Modern Finance you inherently rely more on automation and system controls, and significantly less on manual controls. This adoption of automation within the monthly close and reporting cycles directly reduces the “Financial” risk, while freeing up accountants’ time to focus on complex issues and activities.

Here’s what I recommend:

• Automate the account reconciliation preparation and review process

• Strengthen your segregation of duties within the monthly close process

• Strengthen your system-provided audit trails

• Incorporate a monthly close task management process

• Automate the internal controls audit task management process

• Address the task management process of the numerous required compliance filings

And most importantly:

• Automate the financial risk review process for the CEO and CFO

• Build real-time, high level, global performance dashboards with drill-down capabilities

• Create a well-controlled environment where the CEO and CFO can independently verify that the controls are working properly

As you are preparing your 2015 budgets, it is a perfect time to focus on process improvements and risk mitigation planning. Budget for the modest cost of being a part of the Modern Finance movement and see the return on investment with noticeably stronger controls, increased global visibility of financial activities at all levels of the organization, and a direct reduction to Reputation Risk.