B2B Payments

CFOs Failing Their Boards In Fraud, Risk Management

Corporate treasury is now more strategic for the enterprise, meaning chief financial officers and treasurers must be close-knit with their organizations’ boards of directors. But new research from treasury management firm Kyriba suggests treasurers and CFOs are falling short in delivering on some of the top priorities of the corporate board.

Released this month, Kyriba’s report, “The Six Key Areas Where CFOs Fail to Deliver for the Board of Directors,” examines the relationship between these two key roles in the enterprise at a time when greater pressure and responsibility is placed on the treasury department.

According to Kyriba and researchers at CFO Research, who surveyed 167 financial executives at companies with up to $5 billion in annual revenue, there is a clear winner in terms of what the board of directors is most concerned about in terms of CFO responsibilities: fraud. More than a third (36 percent) of survey respondents said fraud monitoring and risk mitigation are the areas in which CFOs are most falling short.

That’s followed closely by performance risk management and strategic/operational risk management, each cited by 32 percent of survey respondents as areas in which CFOs fail to deliver.

According to Chris Schmidt, director of research and custom content at CFO Publishing, the data paints a clear picture about executives’ concerns over fraud.

“This research confirms that the battle against fraud is not only intensifying, but is now a top-level concern,” he said in a statement announcing the research report. “The senior finance executives we surveyed made it clear that they know they need to do a better job of keeping their boards informed about this critical issue.”

Their concerns aren’t baseless, either.

Separate research released in April by the Association for Financial Professionals in its 2017 AFP Payments Fraud Survey found that corporate payments fraud is now higher than ever, with analysts citing a “dramatic” increase in fraud compared to levels seen in 2015. Check fraud and business email compromise scams have both increased in prevalence; 63 percent of attacks came from outside the organization, meaning businesses are facing the threat of fraud from within, too.

Kyriba’s report found that executives acknowledge the ability of CFOs to help the enterprise combat fraud, with 51 percent saying that managing financial risks and preventing losses are the most important areas in which a CFO can deliver value to the board of directors, followed by business planning and continuity planning (cited by 52 percent).

The Data Connection

Beyond fraud management, Kyriba identified several areas in which boards are eager to collaborate with CFOs and gain their expertise. The report noted that data sharing between the CFO and board is critical to many of these initiatives.

For instance, 59 percent of survey respondents said it is most important to receive critical information and data about budgeting and forecasting from the CFO, while 53 percent said they seek information and data regarding strategic decision-making.

The adoption of technologies is key to facilitating this data aggregation, analysis and sharing that’s necessary for boards, analysts noted.

“CFOs can also push for the adoption of technologies that can automate many of the standardized processes and procedures employed in the finance organization – and in those parts of the business that interact with it – to free up more time for the CFO and his or her staff to spend on strategic initiatives,” the report concluded.

Meeting Halfway

While there are certainly areas in which the CFO is failing the board of directors, researchers warned that there may be ways the board is failing their CFOs, too.

Executives cite “suboptimal organizational structure” in the enterprise as a key barrier to the ability of CFOs to meet strategic objectives, a problem that leaves departments and teams in a silo. Forty-one percent cited a corporate culture that is not favorable to promoting collaboration and relationship-building between the CFO and the board of directors.

Furthermore, 30 percent said CFOs don’t have enough time to collaborate with the board, and nearly the same amount said there are straightforward communication issues between the finance department and board.

More than a quarter cited the composition of the board itself as a hindrance to effective communication and collaboration with CFOs.

Nearly all CFOs said their boards consider them a strategic part of the enterprise and as critical partners in business – but Kyriba concluded that the bridges between CFOs and boards must be built stronger.

“CFOs must work to break down functional and operational silos that impede the sharing of information across the enterprise,” the company stated. “They must embrace technological innovations, including fraud detection and monitoring systems, that automate standardized processes and procedures and allow them to spend more time on higher-value, strategic activities.”

Not all of these silos are easy to overcome, however.

“Where personalities appear to be getting in the way of progress, CFOs must spend time getting to know the people who serve on their boards, understanding the pressures they are dealing with and looking for ways to forge more productive relationships,” Kyriba concluded.

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