Special feature (Part 4): Board support vital for risk management
Coca-Cola SA CFO Walter Leonhardt: It’s important to look out for one another and the business.
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.
Soraya Joonas, financial director at Inyathelo, a non-profit trust, says having the ear of the board makes life easier. As a non-profit organisation, Inyathelo knows that effective risk management is vital for survival, because it derives its funding from donations, and making sure that these resources are not abused is a top priority.
“As NPOs grow and evolve, it’s easy for them to go belly up because of things they didn’t think of or processes they didn’t put in place to mitigate risk,” says Soraya. But having an ethically sound board and a direct line to leadership makes it easier to navigate turbulent times. “One thing I’ve always appreciated about our board is that as a finance person you are bringing issues of risk to the table. I’ve always had a direct reporting line and I’m not edited by the CEO.”
Amending reports after the fact, so that the scenarios presented can be more in line with leadership expectations, is a problematic requirement for many finance professionals. When accountants and risk managers alter their findings in response to pressure, it leaves an indelible mark on their work experience.
The culture of fear becomes prevalent and it makes people reluctant to report suspicious transactions, and employ a ‘do-as-you’re-told’ work ethic. Employees will toe the company line when they’ve experienced abuse of power, or witnessed senior managers and executives using company policies to carry out vendettas and witch hunts against anyone daring to be different.
The Judicial Commission of Inquiry into Allegations of State Capture revealed obscene abuse of power, as well as fraud and corruption in the public sector using organs of state. But despite the explosive testimonies and whistleblowing coming out of the widely publicised commission, there have been zero arrests, let alone prosecutions.
The same is true in South Africa’s biggest corporate fraud scandal, the December 2017 collapse at Steinhoff. Shareholders, including the Government Employee Pension fund, which is Steinhoff’s second biggest shareholder, lost up to R200 billion, but even that failed to spark swift legal action.
Walter Leonhardt (pictured), CFO at Coca-Cola Beverages South Africa says:
“At the heart of that scandal was a major ethics failure. You will not have a successful governance framework and compliance with that framework if the ethical underbed of the organisation is unhealthy, and that’s not necessarily the board, but the CEO and the executive committee.”
Walter says he has concerns about the extent to which corrupt CEOs are made to account for their wrongdoings. “If you hold people accountable, if you fire culprits, and you go after them to recover what is recoverable, that takes a lot of time and guts.
“There are many examples and suspicions of people who have participated in untoward dealings who have not yet suffered the consequences of their dealings, especially within the private sector,” he adds, pointing out that removing a compromised CEO is easy, especially when the board has concerns about the individual, but this is not always done.
In times like these, it’s important to look out for one another and the business. Reporting dubious activity is everyone’s responsibility, and that includes confronting the person responsible. “A lot of the time, incorrect ways of doing things are [applied] out of ignorance. If you know better, you have a responsibility to speak up, and help one and other, instead of talking about it and skinnering among themselves,” says Walter.
He notes that ignoring wrongdoing among peers is becoming increasingly prevalent and that the company suffers in the end. He says people who don’t report or confront wrongdoing because they’re scared, are taking the easy road out. “I won’t deny fear being present, but it’s a cop-out, because there are bodies in place that allow for anonymous reporting.”
He uses the example of looking out for your family. “If you have two children, and the one child sees the other child doing something they shouldn’t, what would you prefer? Does the child keep this information to themselves, or talk to their siblings? The company and government is no different.” He cautions that silence about wrongdoing is actually undermining the family, company and government.