Special Feature (Part 3): Strong ethical governance
Afrimat CFO Pieter de Wit: Risk management cannot operate as a silo an isolated function.
Risk management in the modern day business landscape is becoming increasingly crucial as we navigate through uncertain times. In order for businesses to survive the storms, companies have to be ‘risk intelligent’. Chief risk officers are now charged with ensuring the organisation's financial stability and overall good company health, especially during stormy seasons like Covid-19.
by Narissa Subramoney.
Rampant abuse of power in government, multinational corporations and conglomerates, and even among religious leaders, has shown us just how deep the rabbit hole of corruption can go. If the board is corrupt, it doesn’t matter what is being presented, especially if there is no will to implement the necessary changes.
Company culture is reflected in how people are managed. There has to be strong ethical governance from the CEO, because that culture filters down to its executives and non-executive members and subsequent sub-committees.
Megan Pydigadu (pictured), CFO of IT service management company EOH, knows this challenge well. “We don’t come from a good place. A lot of the failings at EOH came from a lack of governance and oversight,” she says. But the new management decided this was not how it would continue operating and they aggressively adopted a new approach to carry the company forward. Megan and CEO Stephen van Coller took the decision to appoint a group risk officer to help the company move in a more productive direction.
Megan argues that risk departments should not fall under the mandate of the CFO. Rather, risk officers must function independently from the board and company operations so that they may take an unhindered approach to managing risk and uncovering dubious behaviour. “You can’t be doing the work and overseeing what you are doing,” says Megan. So group risk and compliance functions are separate from operations. EOH also appointed an auditing committee as part of its risk management strategy.
But not all CFOs agree with Megan’s approach. Pieter De Wit, CFO at Afrimat, says risk management cannot operate as a silo or as an isolated function within the organisation, but rather that ownership of risk falls to the entire company. “My personal approach is that risk management needs to be driven throughout the business. You can’t expect risk to be handled only by one committee, but rather a collective company approach to risk management.”
Identifying risks usually falls to the audit committees that sit on the board. “Even if CROs functioned independently, I don’t think it will effect much change if the board leadership is unethical, and the reality is you cannot legislate ethical behaviour. Ethics begin and the top and it forms part of company culture,” says Pieter.
As part of Afrimat’s approach to leadership, an anonymous whistleblowing protocol is in place to encourage staff to report suspicious activities. “We want people to speak up, not just about accountability, but also to drive innovation,” says Pieter.
Afrimat hasn’t shied away from dealing with high ranking managers who’ve been caught dipping their pens in company ink. A senior manager whose illicit activities were anonymously reported was immediately investigated and fired once guilt was confirmed. Afrimat didn’t stop there: the company filed criminal charges against the manager at the commercial crimes court.