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Finance professionals as risk managers - an emerging space

Posted: Tuesday 16 June 2009 by Aubrey Joachim
Replies : 6
Category: Management accounting, Risk management
Keywords: ERM, finance professionals, management accounting, risk
Aubrey Joachim's picture

Not many finance professionals would see themselves in roles of risk managers within their organisations. However, a few weeks ago I came across a job advertisement in Australia where an ASX 100 organisation was looking for a risk manager. Not many finance professionals - looking for a career move even in these difficult and trying times, would have so much as given it a second glance. But I did. The specific requirement was for the applicant to be a qualified professional accountant.

Last week I was in Livingstone, Zambia presenting two papers at the 2nd Annual Africa Master Class on Risk Management. Nearly 60 high level business managers from a number of African countries were present. More than half of them were finance professionals. They came from a number of industry segments as well as from the private and public sectors. All of them were interested in organisational risks, but perhaps not recognising that they could play an influential role within their organisations in the context of risk.

Increasingly organisations are looking for finance professionals to take on new and challenging business roles. Finance professionals must begin to look beyond the numbers and recognise significantly value adding business roles in which they could carve a niche and really add value to the bottom line. Risk manager roles are certainly an emerging space for finance professionals.

Why are finance professionals - and specifically management accountants, seen as being suitable for the role? Management accounting competencies not only provide an ability to understand the performance drivers related to business outcomes, and therefore the risks associated with these drivers and their impact on the bottom line, but also to provide organisational decision makers with information that helps with risk mitigation. In addition identifying and optimising business opportunities that arise out of positive risk is also important.

Above all, the most significant competency of a management accountant is not only the transformation of data to information but also the analysis and interpretation of such information for business benefit. It is this business analytics role that makes the finance professional an ideal candidate to take on risk manager roles and bring in management accounting skills into areas suh as enterprise risk management (ERM).

In this time of global financial turmoil when business risks lurk around every corner, there is no better time to be a management accountant!

Comment on "Finance professionals as risk managers"

Posted by Uwe Rosenkranz on Saturday 20 June 2009 14:26
Dear Aubrey, I agree partially with what you are saying. Management accountants should play a more active role in risk management. However, it's easier said than done. My experience is, that senior management asks for figures and statistics, but rarely for a thorough investigation or even "creative input". Also, most people (including managers),don't expect or even want accountants to be creative or innovative. Accountants are paid number crunshers. Even the courses equip us students with the necessary tools, being able to use them and using them correctly is a different story. Bottom line, you can only contribute to it, if you get the chance to. As long as you are not involved in any discussions and nobody asks for your input, there isn't much you can do.

Response to Uwe Rosenkranz

Posted by Aubrey Joachim on Tuesday 23 June 2009 20:10
Let me give you hope, but also a challenge. The reason why senior managers - in most instances, see finance professionals as 'number crunchers' is because the finance fraternity has given that perception as they are reluctant to move away from their comfort zone. Ledgers and spreadsheets have been that comfort zone. In my view, when accountants are asked for 'figures and statistics' they must also be proactive enough to add value by providing value adding commentary. In order to do this, finance professionals must get closer to the business. Today in world class organisations, finance professionals are moving into roles of business partners and are seen as adding significant value to decision making. This year CIMA's technical team is doing significant work in the area of business partnering, and you would find it of interest. Finally, my challenge to you is to move out of your comfort zone and become proactive. You may not have realised that senior managers may not know what to ask of their finance professionals. It is up to you to make them change.

Finance professionals as risk managers - an emerging space

Posted by Thulasizwe Dludlu on Monday 13 July 2009 16:17
Interesting subject to me. First question: what makes a good risk manager? What are the critical skills in risk management? I think I like approaching the subject from the "bottom line" perspective. This being the case, my take is that management accountants should be better placed to understand bottom line issues than the rest of the professionals in business. The only challenge is the stereotype with most accountants, the 'number crunching syndrome' that Aubrey decided to call a comfort zone. I am a CIMA student with a strong leadership orientation, and my take on the matter is that finance professionals should begin to see themselves as an integral part of the business and actually begin to steer the ship. No license is required for steering the ship, just initiative taking and innovation. For your own information Aubrey, I have always like CIMA for the integrative nature of the programming. However, it does seem to me that we need to capture more of the leadership and management staff into the programming to ensure that we do not create too much of 'number crunchers'. I have taken the challenge upon myself to move from being a number cruncher to be a business leader and I think it works perfectly. Business paertnerships? Who can understand this better than the Management Accountant from the implication side of things? No match! A great topic indeed, set to change the world centre stage through management accounting.

Finance professionals as risk managers - an emerging space

Posted by Lovemore Kamchira on Monday 13 July 2009 19:24
What a subject and how interesting are your views Aubrey,Thulasizwe and Uwe. I agree with your views on the changing role of accountants at such a time like this one. I believe regardless of whatever boundary we may be facing in fully executing our roles or potential roles, we need to accept one thing that we are living in a dispensation of continuous change. The role of management accountants has to stretch out to business partners and to get this done, we must make deliberate efforts in the way we are executing our present role to make other functions in the organisation believe we have something unique. As long as we will continue to define and present ourselves as number crunchers, we shall continue being called such. David R Harris one day cited something on risk management as he was doing a presentation on CIMA Strategic score card. He was saying as accountants we need to have a very critical eye on the strategic risks affecting our particular organisation and be able to use that risk profile to affect organisations. One thing for sure is that as individuals and organisations, we need to have a competitive advantage. Building one requires radical behavioural change. Risk management is about understanding potential losses that may arise in the organisation by taking or not taking certain decisions and strategies with a view of mitigating or lowering the losses. As providers of information for decision making, we should be able to include such issues in our reports for example financing, budgeting or any other management reports. For management accountants to add value there will be need to communicate their vision on risk and let it be a shared vision. Martin Luther said ''I have a dream"... we will get into the promised land..even if I may not get there with you .... He had a vision and inspiringly communicated it. Let us therefore start to understand the risk appetites of our organisations and help communicate the possible remedies. Even though they may not be appreciated now, its better now than later. The modern day finance professional has a diversified role. P. Leitner, in his article “Beyond the numbers” (May 1998), stated that accountants role has gone past traditional to that of a corporate strategist. Deebe, G.C, (1999) in his article on “...How accountants can make a difference”, states that accountants must be ready to take an active role in running the company; they must help companies build the right infrastructure for right internal business processes. Russell,Siegel and Kulesza (1999) in their article “Counting more, Counting less: Transformations in the management accounting profession”, points to accountants' roles of a participant in running the business and a strategic management team member. Let us therefore go out there with the attitude "We can" and we will. There is no better time for management accountants to shine.

Finance Professionals as risk managers - an emerging space

Posted by Frank Brown on Tuesday 14 July 2009 08:47
I have been reviewing the comments made regarding this subject and both have pillars of truth among them. Uwe's comments are the traditional we should not get involved with the "creative" side of the business and just correct and advise them if mistakes are made is how it still probably remians in lots of businesses today. Lovemore's post "hit the nail right on the head". As finance profesionals we have a responsibility to get involved and communicate an understanding of the impact of such actions on Price and Profits at "The coal face". The information received will only be as good as it is directed. As Pricing Managers (as I am) and more backroom financial functions need to raise their heads above the parapit to train and guide the "creatives" with the sound financial background that ensures we reduce the number of pitfalls caused by an incorrect or at best misguided communication to the customer. In this way all parts of the business will have an input into the correct forecasting or Risk assesment if you wish to call it that of future strategies. In the economic climate of today this risk assessment and accuracy of projected actions and results are crucial to a companies future survival. It is these practices that I believe should not just be concentrated during difficult times but form the bedrock for more fruitful opportunities when the markets are in a stronger position.

Moving from project risk management to finance risk management

Posted by Stephanie Clack... on Thursday 30 July 2009 00:34
It might interest you to know that I have spent much of the past 15 months on project risk, as this was what sold for the client. The client is not well-established in financial risk fields, which is a great pity, as I think I am better-suited there with my CIMA qualification, even though it seemed to give some comfort to their customers! I can sympathise with Uwe, even though I agree with the others, as agencies invariably look for number-crunchers and they are the first line of candidate reviewers for any job. Unless you pass them, you don't get to their client. Evidence of this exists in the fact that nearly all such ads require you to have worked with some thumping great financial model and I can't really say I have directly. What's the view on the necessity of having done this kind of work? I have done many other things with a view to managing risk and can't see why this appears so necessary.