Finance Departments Focusing More on Risk and Performance Management

Changes in the business and regulatory landscape are driving more companies to expand the role of their finance departments, according to a new study from Protiviti, a global business consulting and internal audit firm.

 

These departments are being called upon to take on new responsibilities related to financial risk management, performance management, and enhanced nonfinancial and statistical reporting, while also addressing a large number of new and pending changes in accounting regulations. As a result, finance executives and professionals see the need to improve their skills and knowledge in these critical areas.

 

These are among the key findings in Protiviti’s inaugural "Finance Capabilities and Needs Survey." In the study, finance leaders from around the world weighed in about their skills and knowledge, along with competencies in need of the most improvement.

 

“Finance professionals face a new reality – one in which they’re responsible for helping their organisations operate more efficiently and profitably and move them into growth mode despite a complex regulatory environment and an uncertain economy,” says James Pajakowski, Protiviti’s executive vice president of global risk solutions. “We believe that measuring capabilities can provide insight into what an organisation does efficiently and effectively as well as areas that might be less profitable than they should be.”

 

Change is a prevalent theme throughout the survey and, not surprisingly, the global financial crisis is a major driver of that change. Respondents pointed to financial risk management (FRM) as the area in process capabilities (financial transactions) that they need to improve the most. This is a strong indicator that executives are working to ensure that their organisations are not caught off guard by financial risks they face in day-to-day operations.

 

Foreign taxes and tax planning round out the top three “need to improve” areas in this category.

 

Executives rank International Financial Reporting Standards (IFRS) as their top improvement priority in the technical capabilities category. “Finance leaders will need to play a key role as convergence of U.S. GAAP accounting principles and IFRS move forward pending final rulings from the SEC to ensure that the integrity of financial reporting processes stays intact,” Pajakowski says. “To fulfill this role, they need to understand the new accounting requirements and their application. This will not be easy when process owners are undergoing the same learning curve.”

 

The study also highlights the trend of finance professionals being relied on more to help companies grow and become more profitable. The top “need to improve” areas in the process capabilities (financial analysis) category relate to driving organisational strategy/direction and improving performance/profitability. These include:  

 

  • KPI (key performance indicator) development
  • Operational and productivity reporting
  • Controls reporting (tie)
  • Project management/other statistical reporting (tie)

 

In the technical capabilities section, the top five areas to improve all relate to looming uncertainties, including: IFRS; Extensible Business Reporting Language (XBRL); readiness for adopting new and pending accounting pronouncements; and fair value accounting and reporting uncertainties to tax authorities (tie).

 

“Finance executives are keenly aware that they must be ready to address and adapt to a broad range of recent and pending changes  from accounting standards to health care mandates,” Pajakowski says. “The big challenge is that many of these changes are evolving quickly, which means that finance executives have to be more nimble than ever before to address them effectively.”

 

The study also finds that finance professionals rate their organisational capabilities higher than their skills in any other category in the survey, yet they still see room for improvement. They noted outside contacts/networking, negotiation, and dealing with confrontation as their top areas for improvement. 

 

Additionally, as the economy shows some steady signs of improvement, recruiting and retention are becoming higher priorities driving a need for finance executives to hone their management and mentoring skills.  

 

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