CFOs and future finance professionals need to have a mind shift from accounting and control to a focus on the drivers of value in the business, according to a new report released by Association of Chartered Certified Accountants (ACCA) and Institute of Management Accountants (IMA).
The report notes that companies must regularly and systematically consider emerging risks to fueling innovation.
In the accounting and finance profession specifically, understanding risk is a key to successfully divert a company from failure to success. As a result, there is growing pressure for accountants to develop business-risk acumen on top of their financial expertise.
"Financial professionals are typically risk averse but need to expand their comfort level to become true strategic players,” says Raef Lawson, Ph.D., CMA, CPA, vice president of Research and Policy at IMA.
Link ERM to strategy and innovation
The report also notes that traditional thinking about strategy has become less relevant as a wave of disruption accelerates the pace of business.
The report highlights key ways that enterprise risk management (ERM) can be successfully tied to strategy and innovation, including.
By incorporating risk-sensing tools, companies can more easily predict and respond to waves of disruption.
With tools that enhance understanding of risk, companies can develop and alter key assets to combat changes in the external environment.
When responding to risk, it’s important for businesses to not only innovate in their fields, but also consider business model innovations.
ERM does not only enable a company to innovate but can also protect it from the downside of innovation.
Companies that do new and strategic things to create their own wave of disruption must also manage the associated risk and uncertainty. This requires a different approach that captures new thinking and new risk tools.
“Innovating without knowing the associated risk is a primary reason for failure in business,” said Faye Chua, head of Business Insights at ACCA. “Being proactive in planning against unforeseen challenges paves the way to succeed in times of uncertainty.”