Archive for KG Business Management

High demand for board positions for CFO’s

High demand for board positions for CFO’s

CFOs to participate on corporate boards is increasing.

Seventy-nine per cent of CFOs are experiencing increased demand for their expertise on corporate boards, according to an Ernst & Young survey of 800 global finance chiefs. CFO and Beyond: The Possibilities and Pathways Outside Finance communicated the results of the survey and a study of 347 companies worldwide with annual revenue over $5 billion.

Current or former CFOs make up 14% of board members of the companies studied, up from 8% in 2002. And 41% of audit committee chairs are current or former CFOs, up from 19% in 2002.

The desire on the part of CEOs to have finance professionals look beyond their functional silo to collaborate effectively on strategic decisions was revealed in the CGMA report Rebooting Business: Valuing the Human Dimension. Those same skills are sought by corporate boards, and CFOs are supplying them.

Jim Ladd, CPA, CGMA, senior vice president of finance and operations at the Institute for Systems Biology in Seattle, estimated that he has served on about 18 boards during his career. His current board responsibilities include an audit committee role for a New York Stock Exchange-listed company, a lead independent director position with a privately owned company in Seattle, and participation on two not-for-profit boards.

He said finance executives can contribute a lot to boards.

“They’re generally sought out initially because of finance background and a knowledge of financial reporting and audit risks and that sort of thing,” Ladd said. “But CPAs have a broader background than that. And people discover that.”

Audit committee a good fit

Finance skills make CFOs ideal candidates for audit committee positions. In many jurisdictions, regulatory requirements demand that at least one audit committee member have financial expertise to keep abreast of evolving accounting standards, risks and regulations.

Public companies listed in the United States, for example, must disclose whether they have at least one financial expert independent of management on their audit committee. The United Kingdom’s Corporate Governance Code says a board should satisfy itself that at least one audit committee member has recent, relevant financial experience.

This can be a benefit and a frustration to CFOs. Eighty-one per cent of them say finance leaders are good choices for audit committee jobs because of their finance acumen. But CFOs want to make sure their skills in strategic development and other areas are recognised, too.

“Some of them can be a little insulted that the breadth of their experience as CFO is not necessarily recognised,” Gerard Dalbosco, an E&Y managing partner, said in the report.

Opportunity to branch out

Although CFOs already have busy jobs, about two-thirds of them reported that they have taken on, or would be willing to accept, more part-time, voluntary or non-executive roles. Twenty-seven per cent said they already have taken such a role, and 40% said they haven’t yet, but would be interested in doing so.

Scott Lampe, vice president and CFO of Hendrick Motorsports in North Carolina, serves on a few community and government boards and said he is willing to consider working on boards of companies that don’t have a lot of risk and are looking to grow organically. “I want to work with companies who share my philosophy about how a business should be run and what kind of contribution it can make in improving the communities is operates in,” Lampe said.

What do CFOs reap from serving on boards? Three-quarters of survey respondents said gaining general management or board level experience is a benefit. Other top benefits included gaining exposure to another company or industry (65%) and getting a different perspective on running an organisation (62%).

“You get to look beyond the purely financial and think more strategically about a different organisation,” Qatar Foundation CFO Faisal Al-Hajri said in the report. “You can also use these roles to play a broader role in society or the community.”

Serving on charitable and community service boards also gives CFOs an opportunity to give back to the community. Mick Armstrong, CPA, CGMA, recently agreed to serve as treasurer on the board of directors of the chamber of commerce in Meridian, Idaho, where he is employed as CFO of Micro 100 Tool Corp.

“We as a company are committed to the community and realise that just our business environment, the quality of life for our employees, all is wrapped up together,” Armstrong said. “So we choose to be involved in the community.”

Protection from liability

Ladd said a key question any potential board member should ask before considering a seat on a board is whether the organisation carries liability insurance for its directors and officers. He said risk exists even at not-for-profit organisations, so board members should make sure they are protected.

In addition, Ladd said, it is important to make sure you are working for an organisation that supports your involvement on an external board. And you need to have the time and energy to fulfil your board duties in addition to your regular job.

Armstrong, for example, said his duties as chamber of commerce treasurer are made easier by Micro 100’s recent hiring of an accounting manager with a public accounting background. As Armstrong moves toward more of an executive leadership role with his company, this distancing from Micro 100’s daily accounting activity also has helped him find more time – early in the morning, at lunchtime and on weekends – to devote to his board duties.

Ladd said he does a lot of his board work during evenings and weekends.

“I sometimes joke with my wife when I come home at night that I’m starting my second job,” Ladd said. “…But most of the meetings are during the day, so you do have to have an understanding employer. That puts some strain and requires extra time in your life. There is no doubt about that.”

Source :GCMA

Strategies to use analytics for competitive advantage

Strategies to use analytics for competitive advantage

Organisations are building momentum for the use of Big Data by integrating data analytics into their strategy in small projects that deliver substantial results, according a new report.

Almost all respondents – 96% – said that analytics will become more important to their organisations in the next three years, according to a Deloitte report based on a mix of 100 online surveys and 35 interviews conducted with senior executives at 35 companies in North America, the UK and Asia.

Although analytics already is an important resource for many companies, analytical technology remains immature and data under-utilised, according to the report. Getting buy-in for further projects is essential, so analytics leaders are starting small.

“Projects that demonstrate analytics’ ability to improve competitive positioning help these initiatives gain traction across the enterprise,” Deloitte Touche Tohmatsu Limited’s Global Analytics Leader Tim Phillipps wrote in the report.

Companies can prepare themselves to use analytics for competitive advantage, according to the report, by using the following strategies:

  • Acquire the right talent now. Talent for analytics and Big Data is in high demand. Talent shortages may become more of a barrier to analytics implementation as more companies use data to drive more processes and decisions.
  • Tie analytics to decision-making. Better data and analysis don’t necessarily result in better decisions. Specific initiatives to improve decision cultures and processes, along with changing the understanding and behaviours of front-line workers, lead to better decisions, the report says.
  • Apply analytics to marketing and customers. Finance operations are the most frequent area of analytics investment, with implementation by 79% of respondents. Marketing and sales groups, at 55%, are the second-most frequent analytics users, and the report says the best financial returns from analytics often come from marketing and customer-oriented applications.
  • Coordinate and align analytics. There is little consistency among companies with regard to who oversees analytics initiatives. Business units or division heads (23%), no single executive (20%), CFOs (18%) and CIOs (15%) were most commonly cited. More co-ordination may be needed to realise the full benefits of data throughout the organisation.
  • Create a long-term strategy for analytics. While current analytical processes are being implemented, a multi-year plan for the growth of analytical capabilities – linked to strategy development – will help organisations better use data over time, the report says.

TOP key concerns keeping directors up at night AND How board can address them

TOP key concerns keeping directors up at night AND How board can address them

Concerns on board members’ minds are similar across the globe, the surveys suggest. Here are the top four:

Managing cybersecurity. “In my opinion, and as reflected in the two surveys referenced, cybersecurity is an area of focus for most boards,” Pickering said.

New digital technologies and cybercrime were two of the three top concerns amongst respondents in the InterSearch survey. The PwC survey found that cybersecurity is top of mind for US directors, with 95% of respondents saying their board is preparing for cybersecurity incidents and two-thirds (67%) saying their board is receiving more reports on cybersecurity metrics. Among the tactics boards are using to address gaps are increasing cybersecurity budgets (57%), engaging third-party consultants or advisers (56%), and providing directors with additional education opportunities on cybersecurity (66%).

The PwC survey suggests that increasingly, directors want the entire board to oversee cybersecurity instead of allocating the responsibility to a smaller group, such as the audit committee. In 2017, half of directors said the audit committee was responsible for overseeing cybersecurity, but in 2018, that number fell to 43%. In 2018, more than a third (36%) said the full board has taken responsibility for cybersecurity, up from 30% last year.

In Pickering’s experience, cybersecurity has best been overseen by the risk committee. “It’s such a specialised area, we really need people who are involved in risk oversight on a more regular basis,” she said, adding that the full board gets regular reports and participates in drills. According to the survey, just 34% of directors said their companies had staged crisis management drills or simulations.

Refreshing the board. Serving as a director is more demanding than ever, said Pickering, who was appointed to her first board two decades ago. “It takes a lot of time. You have to stay informed, read the journals, and make sure you are on the leading edge of what’s coming down the pipe. I believe every director needs to be fully engaged.”

But not all directors are as engaged as colleagues expect, both surveys found. Just 10% of the respondents in the InterSearch survey thought the competencies of current board members matched the competencies needed for the future, and 32% suggested their boards needed alterations. Competencies respondents felt were needed more on the board were digitalisation and new technologies (24.3%), innovation (12.2%), and customer orientation (9.3%).

In the PwC survey, 45% of respondents said at least one board member should be replaced. Directors age 60 or under were also more likely to say a fellow director should be replaced (52%) compared with those age 61 or older (43%) who wanted to replace a colleague. Among their chief complaints about colleagues were directors overstepping their roles (18%), being reluctant to challenge management (16%), negatively impacting board dynamics with their interaction style (14%), and lacking the appropriate skills or expertise for their role (12%). At the bottom of the list, 10% of respondents said they thought advanced age had diminished a colleague’s performance, which ties into long-standing debates about mandatory retirement ages and director term limits.

According to the PwC survey, directors think both mandatory retirement ages (73%) and term limits (64%) are effective strategies for refreshing boards, but less effective than a leadership focus on board refreshment, as well as assessments of the board, committees, and individuals.

PwC recommends annual assessments to identify directors whose expertise no longer aligns with the company’s needs. Less than one-third of respondents (31%) said their boards already use director assessments, but another 46% said they thought the board would be willing to adopt their use.

Avoiding corporate culture crises. Corporate culture is often thought of as the “tone at the top”, but according to the PwC survey, most directors think cultural problems can start both at the executive level (87%) and in middle management (79%). That’s why it’s important to offer employees at all levels opportunities to offer feedback, such as with an anonymous survey, Pickering said.

“You shouldn’t be afraid to ask your employees these questions,” Pickering said. “You need to know if there’s a potential issue. It’s good for culture and the health of the company.”

More than 80% of respondents in the PwC survey said their companies have taken action to address culture concerns, many by enhancing employee training (60%) or improving whistle-blower programmes (42%). But some organisations still are missing the mark by using ineffective tools.

According to the PwC survey, 64% of directors said they evaluated company culture using their intuition or “gut feelings”, even though just 32% said this was a useful approach. Another 63% said they looked to employee turnover to get a read on work culture.

PwC recommends that boards review the quantitative and qualitative metrics the company may already measure to identify gaps and ensure organisational culture is a regular topic on the full board’s agenda. Even if elements that contribute to organisational culture, such as ethics or compensation, are broken off and discussed in committees, the full board should discuss concerns that arise as part of their broader oversight of culture.

Determining the value of diversity. “Gender diversity on boards is still not where it needs to be,” Rand said. “Increased diversity on boards should not be the result of a box ticking or a public relations exercise.”

Almost all directors (94%) in the PwC survey agreed that board diversity brings unique perspectives into their discussions, and 91% said their boards are taking steps to increase diversity on the board, which is a slight increase from last year. However, about half the directors surveyed also said they thought efforts to increase diversity on boards are driven by a desire for political correctness (52%) and that shareholders were too preoccupied with this issue (48%). About a third (30%) said diversity efforts result in boards nominating extraneous candidates, and 26% said diversity results in unqualified candidates being nominated.

In the InterSearch survey, 43% of respondents reported changes in board membership that had already taken place to make the boards more diverse — 67% were driven by the wish for greater gender diversity, 46% to promote greater diversity in competencies, and 25% to provide greater diversity in nationality.

“Being a female, I understand and appreciate diversity,” said Pickering, who was the sole woman on the board for Hancock Whitney Bank for years. “You want to have a diverse board; I believe it makes a huge difference in how boards operate.”

Among attributes, respondents in the PwC survey placed the most importance on gender diversity (46%) compared with racial and ethnic diversity (34%) and age diversity (21%).

PwC recommends that boards consider diversity whilst developing strategies for board refreshment. Boards often recruit new directors by relying on recommendations from current ones, which limits results. The firm encourages boards to look more broadly and consider recommendations from investors rather than board members, and find candidates outside of the corporate world, such as those who have served in the military or worked in academia or at a not-for-profit.

To her board’s credit, Pickering said, it has added two female directors in the last two to three years, including one who was featured in Savoy magazine as one of the “2017 Power 300: Most Influential Black Corporate Directors”. “We partnered with a search firm and found great talent,” Pickering said.

 

What makes a CFO great

What makes a CFO great

A majority of finance leaders said they are increasingly expected to have digital know-how, use data analytics, and manage risks. They also have to deal more with shareholders and regulators than before, according to a global EY survey of more than 750 finance leaders.

Corporate finance leaders face four main challenges. Tackling them will allow CFOs to shape strategy and drive innovation necessary for sustainable growth, but it will also rapidly expand their role, EY research suggests.

Taking on the additional responsibilities is crucial to help develop and enable an overall strategy for the business, provide insights and analysis to the company’s executive management, ensure that business decisions are grounded in sound financial criteria, and represent progress on financial goals to external stakeholders, according to EY.

A great CFO is a partner to the CEO and in private his or her harshest critic when warranted, he said.

Digital know-how. To fulfil critical strategic priorities, 58% of the respondents said they need to better understand digital technologies and data analytics. Two technologies are shaping up to become particularly important for finance leaders to understand: Blockchain, which allows data to be exchanged with the help of a decentralised ledger, could transform corporate reporting. Robotics process automation promises to automate and reduce the cost of back-office processes.

Digital savvy is a priority across industry sectors, because it offers opportunities for growth – in new markets, through new products and delivery models, or by transforming existing products. Financial leaders who understand how their company can deliver on its digital strategy can co-ordinate and focus investments accordingly.

Digital issues to tackle include global tax implications for how goods and services are sold; where companies base their operations; robotics; and new competitors.

A good digital strategy helps a company figure out which technology provides the best return on investment and possibly other intangible benefits. “Not everything will work for your business.”

Data analytics. In the past decade, half of the finance leaders polled by EY have increased the amount of time they dedicate to advanced analytics to provide more insight to the CEO and senior management. Of the respondents in the 2016 survey, 57% said that being able to deliver the data and advanced analytics will be critical for the finance function.

“Using Big Data along with your own internal data makes your internal data even more powerful, and it provides context and connection to the marketplace,”.

For companies to turn these efforts into a long-term competitive advantage, data must become integral to the business strategy, and analytics delivery must match business requirements. To gain more value from analytics, business leaders should focus on training, easy-to-use tools for data users, and aligning incentives, rewards, and measurements.

Risk management. Two-thirds of financial leaders in large companies (more than $5 billion in annual revenue) and 54% of financial leaders in smaller companies said they believe risk management will be a key capability demanded of the finance function.

To play their part effectively, CFOs must think beyond prevention and identify strategic risks, bring up risks in strategic and business planning discussions, and take the time and resources to recruit talent in advanced analytical skills.

“By understanding the pain points of pivotal departments in your organisation,”, “you can look at a balanced level of risk that allows for creativity and mistakes in order to drive the best possible solutions and outcomes.”

Stakeholder scrutiny and regulation. Half of the financial leaders polled said they will have to improve their skills managing relationships with stakeholders, including investors and senior management; in emerging markets it was 59% of respondents.

Understanding what drives stakeholders, communicating proactively, and telling a consistent story about the business will be critical to strengthen stakeholder relationships.

Intense regulatory scrutiny requires CFOs to also work ever more closely with policymakers. Of the finance leaders polled, 71% said they will increasingly be responsible for the ethics of their company’s decision-making.

A great CFO “is a great communicator and is as comfortable talking to boards and investors as [he or she is talking to] a roomful of software engineers,”. “They are flexible and listen to ideas, commercially astute, and up to date with technologies.”

HOW TO TACKLE THE CHALLENGES

To help identify and assess fresh strategic approaches and help their companies, EY considers these five areas as critical:

  • Support innovation and new business models. Collaborating with entrepreneurs and start-ups helps drive innovation and meet changing customer and emerging market needs. CFOs play a key role in building successful collaborations, including effective due diligence on potential partners, aligning incentives between partners, and establishing an effective governance model.
  • Develop and deliver agile strategy. Business strategies should adapt to changing competitive dynamics, differing customer needs, emerging technologies, and a changing regulatory environment. CFOs can develop and deliver these strategies, for example, by unlocking capital for new business opportunities.
  • Drive sustained, long-term growth. Identifying risks as early as possible, managing negative exposures, and seizing opportunities help companies adapt to uncertainties generated by market and regulatory volatility. CFOs can provide investment flexibility to seize growth opportunities, such as new products and services or entering new markets.
  • Inspire and lead the way with strong purpose and ethics. Articulating a business’s purpose and ethical stance motivates employees to meet new challenges. CFOs help embed purpose in the business by leading through example and by grounding it to performance measurements.
  • Support digital. Understanding the opportunities and risks allows companies to incorporate digital into their strategy and into the delivery of the strategy. CFOs can then help the business to deliver the right digital capability at scale, be it by striking a balance between near-term targets and long-term potential or by building the business case for significant technology investments.

10 ways to generate and deliver great insights

10 ways to generate and deliver great insights

A model helps organisations deal with the data deluge and provide insights that support robust decision-making.

In a world where uncertainty is the new norm, where technology is getting smarter, where robots are automating and simulating human activity, and where big data is getting bigger, the pace of winning and losing is getting even faster. The margin for error for organisations is now even smaller, meaning high-quality decisions grounded in insight have never been more important. 

It’s true: Technology is capable of automating a lot of what we used to do when it comes to analysing data. It can even take this a step further and simulate some of our thought processes. That said, technology has one shortfall: It is not human, and generating insights is an inherently human process that needs human traits to interpret what is happening.

Faced with a deluge of data, finding a way to combine these human qualities with the tools on offer will provide organisations with more opportunities to make high-quality decisions grounded in great insights.

I propose a ten-step approach to accelerate the process of generating and delivering insights, which forms the basis of the Define-Determine-Deliver model. The model draws on a number of sources. First and foremost, it is based on my experiences of working with some of the largest insight-driven companies in the UK and US. (Deloitte defines an insight-driven organisation as “one which has succeeded in embedding analysis, data, and reasoning into its decision-making processes”.) I was able to observe best practice in the way these companies collected and organised huge amounts of diverse data, and I gained a profound understanding of performance and how they were able to engage their people to take the right next steps, which led to stronger performance.

Second, the model takes up the themes being debated by practitioners, experts, and authors, in terms of how to organise and interpret the huge, diverse data sets organisations are now collecting. And the more diverse and complex the data, the greater the challenge of communicating insights.

The model consists of three stages. The define stage will help you clarify what you need to do and why. The determine stage offers a set of principles to help you generate insights, and the final stage looks at how to deliver your message to achieve the level of impact and influence your insights deserve.

DEFINE: PLANNING YOUR ANALYSIS

1. Be clear on the value of your insights. The beginning of the insight process involves being clear about what you are being asked to analyse. Over the years of working for a number of insight-led companies I quickly came to appreciate that the significant first question was not “what?”, but “so what?” Understanding the value (the “so what”) that your insights will add helps you engage with what the person requesting the information is trying to do. When you are informed and engaged, you build a more relevant and more focused analysis plan.

Tip: If the person making the request hasn’t already outlined the “so what”, asking them “How will the analysis help?” is a good way to understand what they are hoping to gain from the insight.

2. Partner with an expert. In my experience, those who seek help from someone who knows the particular area of operations well deliver the best insights. They could be a call-centre agent or warehouse manager, for example. Share what you are trying to do with them and ask their opinion. Their support can come in many forms. They may share their experiences of the topic being analysed, may highlight obvious pitfalls, or simply confirm that what you are doing is on the right track.

Tip: Ask the person making the request to recommend the right contact. Once you have a partner, be curious, ask good questions, and listen well to what they have to say.

3. Create a hypothesis. It is important that when you are doing your analysis, you don’t try to analyse all the data available because this could take too long. The process of forming a hypothesis will help you think about the relationships between your data, which should end with your forming an opinion (your hypothesis) on the answer you might find once you have done your analysis. A clear hypothesis, therefore, provides you with an indicator of what to look out for when doing your analysis, helping you to stay focused, whilst reducing any wasted effort.

Always create a hypothesis statement that captures this belief before you start analysing your data (eg, “product availability has decreased because supplier “˜out of stocks’ have grown as the cost of raw materials has increased”).

Tip: Take time to run through your hypothesis with your expert (from tip 2) or any other relevant people. This will help ensure you have a reasonable and balanced hypothesis, and help to avoid confirmation bias.

4. Visualise your analysis. It is all too easy to just dive in and start analysing data. Before you begin, be specific about what you need to analyse. This involves visualising what your analysis will look like once it is finished.

Tip: Get a sheet of paper and sketch out what your data will look like once you have collected it all, listing the rows of data down the left-hand side and the column headings across the top. Then sketch out the analysis you will carry out or the techniques you will apply. For example, do you plan to create a column of data that looks at the difference between two data points or a graph of certain variables? Be as specific as you can, as this will really pressure test what you are planning to do and whether it will add value.

DETERMINE: DOING YOUR ANALYSIS

5. Collect, clean, stay connected. Developing a plan of how and when you will collect your data is important, as this will help to ensure you have everything you need when you are ready to start analysing. Before you start the analysis, you will need to clean your data to ensure it is accurate, complete, and in the right format. There is nothing worse than unclean data undermining the credibility of your insights. Finally, staying in touch with your expert partner from the previous stage will ensure you get the most out of your analysis.

Tip: It is helpful to have a few (but not too many) expert partners. Picking partners with different types of experience is a great way to get a variety of viewpoints, leading to a fuller piece of analysis.

6. Analyse well. In practice, every piece of analysis is different. Therefore, adapt your approach using these key principles:

  • Let the data lead you to the insight. Don’t assume you know the answer before you have done your analysis; this could really bias your analysis. Be open-minded and let the data lead you to the answer.
  • If there is an elephant in the room, say so. Sometimes, when it comes to analysis, we don’t want to accept the most obvious insight; we yearn for something more detailed and more profound. But sometimes the most obvious answer is the right one, and it’s OK to accept it.
  • Correlation doesn’t equal causality. Take care when verifying whether two variables are linked.
  • Focus on what the business needs. If the person asking you for insights needs them in two days to assess an opportunity, then focus on what can be done in that time frame, rather than on the ideal piece of analysis you would produce given more time.

Tip: When analysing data, it is often more useful to focus on trends rather than on single data points. Trends often give you a more reliable view of what is happening. For example, if you are trying to determine which stores are driving low product availability over the year, then focus on the stores that are experiencing consistent decline over the time period (those trending downwards) rather than focusing on one store that had a low score for a small amount of time. (It would be interesting to know why, but don’t miss the big trends contributing to your low product availability.)

7. Bring it all together with a conclusion and indicated actions. Once you have developed some good insights, the next step is explaining what is happening and how the business should respond. This can be a daunting task for finance teams, as the fear of suggesting the wrong thing can create a lot of pressure. Grounding your “indicated actions” in insights will give you confidence in your proposal.

Tip: Seek to ensure your conclusion-indicated actions are correct by writing them out using the following structure: dilemma, insight conclusion, indicated actions:

“I conclude that the reason for ‘the shortfall in sales’ (the dilemma) is because store staff are struggling to get the stock out onto the shelves as the increase in customer numbers means they do not have enough time to restock (the insight conclusion). I propose a pilot project to increase staff in the stores with the biggest declines in sales. If this is successful, I propose a wider review of resourcing in our stores (the indicated actions).”

DELIVER: COMMUNICATING YOUR INSIGHTS

8. Prepare a clear insight message for your audience. The previous step, in which you generate conclusion-indicated actions, is based on what is happening and what you need to do next. The critical difference in this step is that you need to build an insight message to convey to your audience. The insight message is often the only part of your process that the audience sees, and if you want to achieve the right impact and influence, the message needs to be clear and engaging.

Tip: Do the “elevator test” to see if you are ready to deliver your insight message. If you were in the elevator with your manager, could you convey your message (the dilemma, the insights, your recommendation) clearly and succinctly in the time it takes to reach the right floor, all in a way that will resonate and inspire the audience to act on your findings?

9. Craft an engaging message. If you want to deliver an engaging message, then logic alone will not be enough. Engagement requires you to connect to people’s emotions. Your message may well have a good structure, clear visuals, clear arguments, and recommendations grounded in your insight findings. But you also need to build an emotional connection by finding the right tone, forming a connection based on shared aspirations, or focusing on how the proposal will directly benefit the insight requestor and their teams.

Tip: Stories are a good way of helping to deliver a more engaging and memorable message. Stories grab people’s attention, bring messages to life, and help link insights to the big picture. For example, if you are trying to put new customer service metrics into context, you could use statistics. “Customer service scores are at 60%. This is a reduction of 10% versus last year, and we need to do better.” Alternatively, you could tell a story that brings your numbers to life. “Last year we were not at our best for 40,000 customers. That is two out of every five customers that came to us. Here are some of the things our customers said and how we impacted their lives by not being at our best …”

10. Build an insight-led culture. Having a framework is a good way to accelerate the insight process. In the insight-led companies that I have worked for, this framework was embedded into the beliefs of their people, which was demonstrated every day in their behaviours. This level of engagement with the principles of the framework allowed these companies to accelerate insight generation, as well as to adapt those principles to address a particular problem when required.

Tip: Always be a role model for insights, giving your teams or colleagues the confidence and the right to be curious and to always seek out the underlying truth as to what is driving performance.

Source : FM

How To Predict Which Of Your Employees Are About To Quit

How To Predict Which Of Your Employees Are About To Quit

You’ve got more data on how your team members are behaving, thinking, and feeling than you probably realize. Here’s how (and why) to tap into it.

How To Predict Which Of Your Employees Are About To Quit

“People analytics” may sound daunting, expensive, and difficult—something the ordinary manager can’t possibly concern herself with even if she’d like to. But the field isn’t necessarily as high-tech as you might imagine.

There’s more untapped data, of some kind or another, floating around your workplace than you probably think. With a little extra effort to spot behavioral patterns, you may be able to get ahead of some of the more common issues, like employee attrition, that can hurt your workplace and your organization’s bottom line. Here’s how.

PHONING IT IN

Turnover tends to be high at call centers, where many people take jobs temporarily, then quit when once they’ve earned enough to return to school or cover a big expense. Lower attrition means higher performance, so managers are interested in predicting and reducing attrition.

My company helped one call center analyze some basic data that it was already collecting: the length and number of calls operators were taking, and how often those calls got escalated or resolved. At the end of each shift, employees received a “report card” reflecting those data points. Since the call center employees’ compensation was linked directly to that performance data, they were highly incentivized to earn good marks.

But a low overall score wasn’t necessarily a sign that an employee was performing poorly, getting paid less, and therefore planning to bounce. Analysts found two specific factors were much more predictive: increased time spent on calls, and fewer calls ending in resolutions. Those operators were just going through the motions.

So the call center’s managers sent supervisors to meet with each operator within a day of those two indicators popping up. Most, however, hadn’t yet reached a point where they were considering quitting. But they often didreveal job frustrations that were usually easy to address, a like a faulty headset or having to work an undesirable shift. Supervisors were empowered to fix most of these problems, and over the next few months, the call center’s attrition rate fell by half.

FEELINGS AND ACTIONS YOU’RE NOT PICKING UP ON

“Sounds great,” you might be thinking, “but I don’t run a call center.” Even so, you can probably start looking for small, early signs of dissatisfaction that are relatively easy to remedy once you spot them. Here are two:

1. Ask employees how they’re feeling–continuously. Measuring “perceptions” might seem impossible, but it’s not. To collect data on something like this, you can use pulse surveys, run focus groups, or take snap polls using common Slack integrations like Polly.

Some large, physical office spaces even go analog and install those sentiment buttons you might have seen in airports or hotels. They’re simple, inexpensive devices that ask a question like, “How was your day?” and provide red (bad), yellow (okay), and green (good) buttons for people to press quickly as they go about their day. Whatever method you use to gather sentiment data, aim for something easy and anonymous, and watch for trends, not absolute values.

2. Look for dips in hours worked or effort spent. A basic place to start is total login time, but unless your office requires workers to “punch in” or “out,” introducing software to monitor exactly who’s sitting in front of their computers when can feel like surveillance. So start with the data you’ve already got on hand but may not be analyzing fully: How much sick leave is being taken this quarter, compared with last quarter or with the same quarter the prior year? How much annual leave is being requested (regardless of what’s actually granted)?

These are usually good indicators of who may be on their way out. Sick days can be requested to attend interviews or to burn up unused leave balances—or maybe that person is just feeling burned out and needs to take some mental heath days to deal with on-the-job stress.

THE LINKEDIN TRICK

There’s a third method, too, that I’ve seen work wonders. A well-known tech firm that recently worked with my company was losing its precious engineers. Recruiters who spent a lot of time looking for coders on LinkedIn were already in the habit of noticing recently updated “Skills” sections, interpreting that as a sign an engineer might be interested in hearing about new opportunities. So it occurred to the tech company to apply this principle in reverse.

The managers realized that their own coders were probably doing the same thing–updating their LinkedIn profiles whenever they were ready to hear from other firms. So the company wrote a simple script to capture the LinkedIn update feed for the profiles of around 2,000 of its top-performing coders. That let managers to react quickly whenever one of those employees added new info. Similar to the call managers, supervisors then swooped in to discuss the career goals and professional-development opportunities with the coders who might be wavering.

As a result, turnover fell, and many of those engineers were moved to assignments or projects that suited their talents and interests much better.

USE YOUR DATA WISELY–AND FAST

Whatever patterns you decide to watch, make sure you’re gathering data for two weeks to two months, so you’ll have enough information to perform a reasonable analysis.

But once you do spot a certain trend, don’t wait to act. Start looking for the source of the dissatisfaction in the corner of the company where you’re picking up on it. Maybe a certain team just really needs flex schedules or better recognition, or they feel starved for information. Often the most effective remedies aren’t even monetary. Once you’ve determined a solution, measure its effectiveness to make sure it continues to produce the outcome you’re hoping for.

At the end of the day, most employees all want the same basic things. Done right, people analytics starts from that humane premise and doesn’t reduce people to numbers–it just helps companies understand why certain situations cause people to keep behaving in certain ways. Ideally, it’s good for everyone when there are fewer surprises, and there’s more happiness to go around.

Read More →

The CFO as chief risk manager

The CFO as chief risk manager

The CFO as chief risk manager

Disruption is driving risks for every organisation. CFOs can play a critical role in helping organisations proactively manage them and create value.

The role of the CFO in managing enterprise risk and creating future value continues to evolve in this dynamic and rapidly changing environment of disruption. Our research, which we released in a report by the Financial Executives Research Foundation (FERF), The Strategic Financial Executive: Managing Enterprise Risk in a Disruptive World, describes strategies CFOs can use to manage risk and create value in today’s dynamic landscape and discusses how CFOs can incorporate strategic risk themes emphasised in the new enterprise risk management (ERM) framework by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).

The research is based on extensive interviews with financial executives and other corporate stakeholders from leading companies. The takeaways in the report encompass four strategic themes: recognising disruption, developing risk management maturity, communication, and strategic thinking.

THEME 1: RECOGNISING DISRUPTION, THE SPEED OF CHANGE, AND UNDERLYING SOURCES OF DISRUPTION

The roles and skillsets of the financial executive must swiftly adapt. CFOs bring value to the table by, among other things, informing the board and CEO regarding matters they may not be familiar with and providing insight to nuances they may not have seen.

Fifty years ago, people managed physical assets to deliver cash flows, explained Corey West, CPA (inactive), chief accounting officer and corporate controller for Oracle. “Today, you manage intangible assets to deliver cash flow. Those intangible assets can be valuable one day, and it can go “˜bye-bye’ the next, depending on who enters a marketplace where you’re competing. … The importance about understanding the business you’re in, the competitive landscape, and where your competition might be coming from, [from] a strategic standpoint, is a lot more important now. I think CFOs need to be part of that thought process.” (See the sidebar “Dealing With Disruption” for actions to take to recognise and cope with change.)

THEME 2: INCREASING THE ENTERPRISE’S RISK IQ AND CAPABILITIES

ERM is evolving and becoming more strategic in its efforts and results. Given the efforts of COSO to highlight strategic risk dimensions, executives should expect board members to ask more strategic risk questions and be prepared to address them when asked. The ERM framework developed by COSO points out that strategic risks can be sourced as follows:

  • Strategy and business objectives not aligning with mission, vision, and values.
  • The implications from the strategy chosen.
  • The risk involved with executing the strategy.

Executives and board members should seek or reconfirm their knowledge related to those strategic risk dimensions. To get this right, financial executives should look to leverage their current ERM processes to determine what strategic risk help and analysis is being developed. Some advanced companies already use strategic risk analysis tools, such as workshops on strategic disruption, black swan events, and emerging trends practices. (See the sidebar “Boosting Risk IQ.”)

THEME 3: THINKING AND COMMUNICATING STRATEGICALLY

With the proper strategic thinking, noise and signals can help your organisation to know where the market is heading and where to compete. Consider all the factors, such as customers, the global economy, foreign currency hedging, and contracts with escalations. (See the sidebar “Thinking Strategically.”)

Financial executives are in a unique position to take advantage of an integrated approach that sees changes, identifies the risks, and links them to the business model.

THEME 4: DEVELOPING SKILLS TO ENABLE A FORWARD-THINKING FINANCE ORGANISATION

Successful financial executives look toward future value creation. Decisions made with this risk information are aimed toward better business models and future strategy. “Enterprise risk management consists of a set of forward-looking tools for senior management,” said Jeff Pratt, general manager of enterprise risk management at Microsoft.

Knowledge of accounting, finance, reporting requirements, and related skills may have helped financial executives move to the top. But that knowledge is not enough to keep them successful and able to add the most value to their organisations. We recommend based on work with CFOs that they develop a professional development plan for their CFO team that incorporates strategy, strategic risk management, and business model skills. Consider the profile of skills needed, and access the current skillset as a starting point.

“The more senior role that you play in the organisation, the more time you should spend looking forward versus looking in the rear-view mirror,” said Bob Verbeck, senior vice president of finance and corporate controller at Boeing. “… It’s really about proactively determining where you are going with your responsibility [and] your business.”


Dealing with disruption

Financial executives can take the following steps to help recognise disruption, grapple with the speed of change, and understand the underlying sources of change:

1. Periodically rethink and redefine your real competitors. Look outside of the normal channels.

2. Get involved in the identification of signals of change facing your organisation.

3. Ensure that you are looking at the right sources of change and disruption.

4. Build a sophisticated process to identify noise and potential changes.

5. Consider your company’s customers as a key source of information, not just about current sales but about future change and potential disruption.

6. Have contingency and resiliency plans based on the size of a disruption.

7. Factor in reaction time. It is more important for some areas than others. Identify when it is critical for your organisation.

8. Survey the landscape. Look for disruptors in technologies. Look for disruptors in other industries that might indicate changes in your sector.

9. Build a method to link change and disruption to the business model and to your enterprise’s current strategy.

Source: Financial Executives Research Foundation.


Boosting risk IQ

Financial executives can take the following steps to help their organisations boost their risk IQ and capabilities:

1. Check with your board to determine what information they need about each of the three strategic risk dimensions.

2. Develop a plan to address those needs.

3. Compare your current risks with the three dimensions. Do they all fall into one of the dimensions (perhaps strategic execution risk)? Adjust for any areas that have no associated plans or tools.

4. Review how strategic risk is addressed in your ERM process.

5. Know the answers to the following questions: What tools have we applied to know that our strategy is the right one? What tools have we applied to determine if we are aligned? What tools have we applied to strategic execution risk?

6. Work with the ERM team to improve the risk IQ and broader risk thinking in the organisation.

7. Ensure that risk thinking is seen as part of business thinking.

8. Review the smaller recurring risks for potential surprises. Look for a larger pattern or theme that could signal additional risks.

9. Develop tactical strategies for known risks. Take the risk beyond a map and consider the longer-term budgeting and financial implications.

10. Identify the assumptions in the risk-profile rankings.

Source: Financial Executives Research Foundation.


Thinking strategically

Financial executives can take the following steps to think and communicate more strategically:

1. Ensure that identified risks are incorporated into the business units.

2. Have regular sessions to rethink derailment, opportunities, new business models, and the related risks.

3. Understand the business’s view of the risk. Engage business units. Listen to their points of view.

4. Bring in subject-matter experts, futurists, and others to validate the potential business model and strategic risks.

5. Review trends in cross-functional business teams to determine their impact and opportunities.

6. Measure each dimension of strategic risk.

7. Test new strategic risks.

8. Flesh out the financial implications of major risk assumptions.

9. Track identified risks to the strategic plan.

10. Have regular sessions to focus on leveraging the risks into new business models. Do this also with your key customers.

Source: Financial Executives Research Foundation.

Six Ways to Curb the Costs of a Data Breach

Six Ways to Curb the Costs of a Data Breach

You can’t lose a customer’s or an employee’s data if you don’t have it.

For those paying attention, 2017 has provided a steady and impressive litany of data breach victims, from video games to hotels to burrito shops to nearly every American voter. This is a direct continuation of the trend from 2016, in which roughly 40% of breached companies had under $100 million in revenue, and only 11% had revenue greater than $1 billion. No matter what size you are, you’re a target.

Even as CFOs are increasing spend on IT security technology to prevent incidents, we know security is never guaranteed. It’s now incumbent upon CFOs to take on cyber risk through the lens of damage mitigation, not just prevention.

CFOs, however, are often challenged when they try to understand the true cost drivers of a cyber incident. For example, in the health-care industry, we’ve seen one organization receive a regulatory fine of $750,000 for exposing 90,000 patient records and another a fine of $3.2 million for losing 2,400. This apparent irregularity of costs extends to all industries.

While the drivers of data breach costs can sometimes be unexpected, they are not random. Here are six lessons CFOs can learn about breach costs and how to keep them down:

  • You can’t lose what you don’t have. Simply put, you can’t lose a customer’s (or employee’s) data if you don’t have it. While this may seem obvious, it’s not trivial. In 2015, the health insurer Anthem and its affiliates served 69 million customers, yet when they were breached that year, they exposed 78 million records. The extra nine million records most likely come from former customers. Each of these individuals had to be notified and offered credit monitoring, driving up costs. The first lesson: You can potentially dramatically reduce your exposure by destroying records of past customers.
  • You can’t mail letters if you don’t have an address. In the event of a breach, companies are typically required to notify affected individual via old-fashioned, handwritten “snail mail.” But they can use alternative methods of notification, such as email or public announcement, if they do not have a valid mailing address. Physical, written notifications can cost up to $2 per person, and the cost quickly adds up. It may be worth asking twice what the business need for those customer addresses is and considering not capturing these addresses to reduce the exposure to notification requirements.
  • You say it wasn’t a breach, but can you prove it? Data from BakerHostetler shows that that in 44% of incidents, public notification is not required. To avoid notification, companies must prove that, even if they were attacked, no records were improperly accessed. To do so, they use systems logs, which keep track of user activity and show who accessed what records, when. Unfortunately, many companies don’t activate their systems’ logging or don’t configure them properly. Without logs, a company may be forced to assume a breach occurred because it cannot prove otherwise. CFOs don’t have to be network experts to ask, “do we have sufficient logging enabled to prove whether personal records have been accessed?”
  • You can’t stop credit card fraud after a breach. For breaches that involve credit card data, reimbursing card companies for fraudulent transactions can amount to a staggering cost, from $3-$30 or more per card, according to the BakerHostetler study. New chip cards are designed to reduce fraud, and early data show they are having the intended effect – MasterCard reported a 54% reduction in counterfeit card fraud costs at retailers who have switched to chip cards. While there are many considerations for companies transitioning to chip cards, CFOs should factor reduced damages from data breaches into their cost-benefit calculations.
  • If you’ve never done this before, get help from someone who has. Your breach response effort is not a good time to reinvent the wheel. Missteps happen fast and have serious consequences. One example is customer communications. After a breach, the pressure to communicate quickly with customers can be intense. But ineffective communications can cause panic, dramatically increasing the rate at which customers phone into call centers and sign up for credit monitoring. Credit monitoring alone can cost $5 to $30 per person. Data breach specialists, such as PR consultants or data privacy lawyers, often have seen as many as hundreds of data breaches and are highly practiced at helping you craft a genuine story that keeps confusion – and costs – down.
  • You are going to be investigated by regulators. In the wake of a breach, a company may be investigated by a number of regulatory agencies. While it’s not guaranteed to occur, it is likely, and there are simple steps you can take to prevent sensational fines if it does. To start, CFOs should be strong advocates for implementation of the security controls recommended by external auditors or by regulators themselves. The $3.2 million fine cited earlier came on a hospital’s second breach in a short span, over which they had knowingly refused to make the improvements previously recommended to them.

While these steps will help mitigate the cost of a data breach, for many CFOs, new cyber threats such as ransomware are a growing threat. Finance chiefs should be aware that one of the first steps in response to a ransomware incident is to determine whether the attack also constitutes a data breach (that is, if the ransomware attackers have access to the encrypted files). If the incident is also considered a data breach, the actions above are equally relevant.

While the costs of a data breach can vary widely on a case-by-case basis, CFOs who understand the drivers behind the expense will be better positioned to take steps needed to protect their organization when the unfortunate – but inevitable – happens.

 

10 Keys For Executives To Manage Reputation Risk

thumbs down with one-star rating

10 Keys For Executives To Manage Reputation Risk

With today’s electronic and social media, the news cycle reporting on the downward spiral of a once-proud organization that has suffered severe reputation impairment is not a pleasant one to watch. Unfortunately, such news events capture our attention all too frequently, leaving an indelible impression about a company’s reputation and brand image.

Applied to a business, “reputation” represents an interpretation or perception of an organization’s trustworthiness or integrity. While the truth ultimately prevails over the long term, reputation can be based on false perceptions in the near term. If accurate over time, reputation provides a barometer of how an organization is likely to respond in a given situation. However one defines reputation, everyone agrees it’s a precious enterprise asset and recognizes a reputation that has been damaged beyond repair.

We define “reputation risk” as the current and prospective impact on earnings and enterprise value arising from negative stakeholder opinion. To one author, it is “the loss of the value of a brand or the ability of an organization to persuade.”1Bottom line, reputation is fragile. What takes decades to build can be lost in a matter of days.

Below, we explore 10 essential keys for senior executives and directors to consider in managing reputation risk. We classify them in five critical areas – strategic alignment, cultural alignment, quality commitment, operational focus and organizational resiliency.

Strategic Alignment

#1: Effective board oversight: Reputation risk management starts at the top. Strong board oversight on matters of strategy, policy, execution and transparent reporting is vital to effective corporate governance, a powerful contributor to sustaining reputation and the ultimate checkpoint on CEO performance. For example, the board’s oversight of risk is important because effective identification and management of risk can identify major threats to reputation and ensure they are reduced to an acceptable level.

#2: Integration of risk into strategy setting and business planning: The board and executive management must ensure that risk is not an afterthought to strategy setting and business planning. Integrating risk with these core management processes makes it a relevant factor at the decision-making table, facilitates a strategic view to undertaking risk, and intersects risk management with performance management. In an effort to make the strategy more robust, directors and executives should understand the critical assumptions underlying the strategy, ask appropriate questions to challenge assumptions constructively and consider reasonable scenarios that could render one or more of the assumptions invalid. It is important for management to define the inherent soft spots, incongruities and opportunity and loss drivers that could impact execution of the business plan and dramatically affect performance. Also, the budgeting and forecasting processes supporting the business plan must be effective in managing liquidity risks that can threaten the organization’s viability during the planning period.

#3: Effective communications, image and brand building: Building brand recognition unique to a business is vital to market success and, when all else is working well, augments reputation. A good story is easy to tell, but every savvy board and CEO know that some companies are better at telling their story than others. Therefore, directors and executives need to understand the image and brand-building game plan. Typically, the best companies are customer-focused; understand their value proposition; develop powerful and distinctive messaging; listen well and act to improve their processes, products and customer experience continuously; establish accountability for results with metrics, measures and monitoring; work social media effectively; and passionately live up to their brand promise every day. The messages the press, analysts and others communicate about the company through print and electronic media and word of mouth are influenced by good marks on the other nine keys to managing reputation risk.

Cultural Alignment

#4: Strong corporate values, supported by appropriate performance incentives: The trickle-down notion that, if tone at the top is good, the organization’s culture must be good, doesn’t always hold. Lower-level employees often pay more attention to the messaging and behavior of their supervisory middle managers than the messaging and values communicated by the organization’s leaders. Boards need to ensure that executive management implements a strong tone at the top, a variety of effective escalatory processes, and periodic assessments of the tone in the middle and tone at the bottom. To that end, the executive team needs to ensure alignment of performance incentives with corporate values to shape and influence the corporate culture end to end:

  • Up, down and across the organization
  • Upstream with strategic suppliers
  • Downstream with channel partners

Also, executives and directors need to pay attention to the warning signs posted by the independent risk management function and in audit reports evidencing the possibility of dysfunctional behavior.

#5: Positive culture regarding compliance with laws, regulations and internal policies: Few incidents undermine reputation more than serious compliance violations with the attendant headline effect of the brand being dragged through the mud by the media. Senior executives, with board oversight, should ascertain that effective internal controls over compliance matters are implemented. Executive management must “walk the talk” with respect to compliance, meaning executives should:

  • Maintain strong compliance administration and oversight across the organization;
  • Periodically conduct a comprehensive risk assessment;
  • Refresh the compliance program for changes arising from new regulatory developments;
  • Understand the players and third-party agents in countries in which the organization does business and monitor their dealings closely;
  • Implement robust compliance training and certification;
  • Ensure that adequate documentation of compliance-related communications to and training of employees is maintained; and
  • Implement escalatory processes for reporting wrongdoing and suspected violations along with effective follow-up upon receipt of allegations meriting investigation.

In addition, effective auditing and monitoring capabilities to evaluate compliance effectiveness should be in place to ensure the above capabilities are functioning as intended.

Quality Commitment

#6: Priority focus on positive interactions with stakeholders: The executive team and board of directors should ensure that there is a passionate focus on improving stakeholder experiences. These are the accumulation of day-to-day interactions that customers, employees, suppliers, regulators, shareholders, lenders and other stakeholders have with a company as a result of its business operations, branding and marketing. If internalized and acted upon, they are a powerful driving force for improving and sustaining reputation. To illustrate, organizations that take the time to really know their customers, align company goals with customer needs and act to ensure a distinctively different experience for customers are going to be noticed in the marketplace.

#7: Quality public reporting: When public companies restate previously issued financial statements for egregious errors in the application of accounting principles or omission or misuse of facts, investors notice. For companies contemplating an initial public offering, a well-designed financial close process, effectively functioning internal financial reporting controls and an understanding of what not to say when talking with the press and the investor community are important. For established companies, vigilance in maintaining internal control over financial reporting and in deploying effective disclosure controls and procedures is important to ensure reliable public reports. The markets take quality public reporting at face value. Once a company loses the public’s confidence in its reporting, it’s tough to earn it back.

These points suggest that a strong audit committee is an imperative.

Operational Focus

#8: Strong control environment: A critical component of internal control, the control environment lays the foundation for a strong culture around achieving the organization’s operational, compliance and reporting objectives. In addition to management’s commitment to integrity and ethical values and the oversight provided by the board of directors in carrying out its governance responsibilities, as discussed earlier, the control environment consists of the organizational structure and assignment of authority and responsibility; the processes for attracting, developing and retaining competent people; and the rigor around setting the appropriate performance measures, incentives and rewards that drive accountability for desired results. Because embarrassing control breakdowns can tarnish reputation, every board should expect and demand a strong control environment.

#9: Company performance relative to competitors: Even if a company does everything else right, its reputation will suffer if its business model is not competitive. Market recognition of success is a huge validation of a company and its management team. Recognition of differentiating strategies, distinctive products and brands, proprietary systems and innovative processes are intrinsic sources of value that can translate into superior quality, time, cost, innovation, talent management and customer-fulfillment performance relative to the company’s competitors. On the other hand, significant performance gaps vis-à-vis competitors can diminish reputation if they are not addressed in a timely manner. These factors should weigh heavily on a board’s evaluation of company performance over time.

Organizational Resiliency

#10: World-class response to a high-profile crisis: Sooner or later, every company is tested. As a crisis event is a severe manifestation of risk, crisis management preparation is a natural follow-on to risk assessment, particularly for high-impact risk events with high-velocity, high-persistence and low-response readiness.

Executive management, under the board’s oversight, should ensure that the risk assessment process is designed to identify areas where preparedness is lacking and, therefore, response planning is needed. If a crisis management team doesn’t exist or isn’t prepared to address a specific sudden crisis scenario, a rapid response will be virtually impossible. Fires cannot be fought with a committee. Response teams should be supported with robust communications plans emphasizing the importance of transparency, straight talk and effective use of social media. The response team should update and test the rapid response plan periodically.

While a one-size-fits-all approach to reputation risk management does not exist, attention to how a company addresses these 10 keys will help shape its reputation over time. Reputation risk management is inextricably linked to the company’s risk management and crisis management disciplines, as well as to the alignment of strategy and culture with the enterprise’s commitment to quality and operational excellence.

From the standpoint of executive management and the board’s oversight, the 10 keys offer a framework for focusing on what’s really important when managing reputation risk.

Questions for Executive Management and Boards

The following are some suggested questions that senior executives and boards of directors may consider, based on the risks inherent in the entity’s operations:

  • Is executive management focused on the appropriate fundamentals for enhancing and preserving the enterprise’s reputation?
  • Does the risk assessment process source significant threats to the company’s reputation and identify areas requiring consideration of response plans to improve preparedness and rapid response? Is there a rapid response plan for the high-impact, high-velocity and high-persistence scenarios identified in the risk assessment process?
  • Is there adequate focus on the critical enterprise risks that could impair the enterprise’s reputation if not managed effectively? Does management apprise the board timely of significant changes in the enterprise’s risk profile? Is there a process for identifying emerging risks on a timely basis?

4 best ways to use advanced analytics

4 best ways to use advanced analytics

4 best ways to use advanced analytics

Predictive and prescriptive analytics help companies use the increasing amounts of data to improve their business and financial performance.

Predictive analytics use statistical analysis, data modelling, real-time scoring, and machine learning to detect trends for forecasting. Prescriptive analytics rank the trade-offs of different courses of action companies may take to reach certain objectives, for example through scenario modelling.

“Traditional analytics such as profit, cash flow, and return on assets don’t really tell the full story,” said Chris Ortega, an artificial intelligence expert and senior finance manager at Emarsys, a global software-as-a-service marketing cloud company.

Advanced analytics can increase learning and knowledge throughout the business, produce repeatable analytics to measure success or failure, and hold the business accountable to results, Ortega suggested.

While the potential benefits are compelling, most companies face challenges in implementing advanced analytics. They revolve around the classic pillars of any company – people, processes, and technologies. “Some organisations don’t have the right processes driving the data, or the people in place to identify and understand the analytics, or some don’t have the technology in place to make sense of advanced analytics,” Ortega said.

The biggest challenges of implementing analytics, according to the Financial Executives Research Foundation, include:

Getting quality data out of multiple legacy IT systems that don’t share information, in companies with processes that aren’t standardised, or in companies that rely on spreadsheets.
Overcoming cultural resistance to change.
Finding qualified data scientists who can work well with IT, understand databases, and know how to explain and meet business needs.
Best analytics practices
The increasing flow of data, generated rapidly inside and outside the company, can be overwhelming, but advanced analytics can turn the data into a competitive advantage for a company. The Financial Executives Research Foundation found that companies prefer to use advanced analytics for these four purposes:

Gain deeper insights. Analytics can help companies anticipate the effects of variables such as marketing campaigns, market conditions in a specific region, or price discounts to project sales and plan production. Analytics also provide insights into supply-chain metrics such as inventory turnover, stock values, procurement trends, warehouse performance, quality control, and compliance.

Identify root causes. To figure out what causes, for example, higher reports of damaged items among custom-ordered products, a company can use analytics to determine that improper packing and shipping of delicate materials was not the problem. Instead, the company may find that sales and return data point towards incorrect orders. To resolve the issue, the company can then retrain its sales team.

Assess market competition. Companies can use analytics to identify patterns that suggest which customers are more likely to leave, and quantify the likely effects on revenue and profit. This information is valuable in determining which investments are most likely to increase customer retention and growth.

Identify and manage risk. Analytics can help companies analyse accounts receivable to create profiles that rank customers based on the likelihood that they will pay invoices promptly. This, in turn, allows a company to customise its credit terms and communications plans to increase the efficiency of its collection efforts.

SOURCE : GCMA