With cybercrime, Brexit and the surprising result of the US elections affecting economic sentiment, these are unpredictable times. The modern CFO has to contend with the risks of this environment, acting as both policeman and enabler, but relinquishing the natural tendency to forgo all risk.
During the CFO event on 10 November 2016 at the opulent Inanda Club in Johannesburg, leading financial executives examined the critical skills needed for ascertaining risk and identifying blind spots, elaborating on what they are doing to enhance their ability and the organisation’s risk capability. The event was sponsored by KPMG, Standard Bank and Thomson Reuters, with Luvuyo Masinda (CFO Standard Bank Corporate and Investment Banking), Sibanye Gold CFO Charl Keyter and Thomson Reuters Africa MD Sneha Shah sharing their thoughts on the subject.
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Luvuyo said that Standard Bank was looking to allocate resources to deliver profits within the defined risk appetite in a purposeful manner:
“There are internal and external forces influencing risk, like regulation and compliance that isn’t always fit-for-purpose in banking. We could write books about poor risk management and have lost money and eroded shareholder value because we didn’t understand our clients.”
Standard Bank’s new client-centric approach means that the business is engaging with staff directly in an effort to get them to understand the broader goal of the company and train them to develop their personal brands in a way that didn’t harm the bank’s reputation.
Risk is in mining companies’ DNA, from mine shaft to boardroom level, asserted Charl. He said Sibanye mitigates risk with conservative pricing assumptions and that his role entails understanding the complete value chain of the business and identifying opportunities that arose from risks. Charl:
“The CFO must be the reality check for those who are happy to run down a path across all sectors. There are rules that introduce this internally, but recruitment of people who fit into our culture and direct communication with employees are also important.”
Sneha stated the role of a CFO in acting as a firm’s conscience in a shifting world and being seen to do the right things was more challenging than ever before.
“CFOs have to know what is going on, not just on site, but everywhere else. They need to take a step back and lift themselves above the clouds to gain a better perspective than anyone else. This can be overwhelming, but there are solutions that can help.”
Of these solutions, automation and technology that allows CFOs to leverage big data and bring up red flags is critical. Thomson Reuters, for example, has the capacity to scan 100 million websites a day. Another key aid is a diverse workforce that offers different perspectives and skillsets to help organisations the kind of countervailing forces that may have prevented the subprime crisis.
Finally and most important, is a change-ready culture. “Thomson Reuters has invested in an external service provider to drive culture change and to understanding our language, values and principles. This has worked wonders. We haven’t failed to meet shareholder expectations over the past five years and our staff speak-up rate has gone from 71% to 91%. Culture is the glue that holds the company together, but it is also what allows for rapid change,” said Sneha.