Supply Chain Disruption and Customer Viability Top Finance Leaders’ Risk Management Worries
09/19/2018
Finance departments are struggling to manage risk, a recent report from Dun & Bradstreet finds, and many finance leaders “believe their own efforts to manage, monitor and predict risk pose a moderate to high risk to their businesses.”
In order to find out how today’s finance leaders are managing risk and what their future risk management plans look like, earlier this year Dun & Bradstreet commissioned a study of approximately 1,100 finance professionals, the vast majority of whom were based in the U.S.
A key finding from this study is that many finance professionals have a poor grasp of digital tools such as automation and analytics. Their risk management approaches reflect this, with more than 60% of the surveyed professionals collecting data in silos, as opposed to sharing it across the company.
What Are Finance Leaders Worried About?
Source: Dun & Bradstreet
Decline in customer viability and increased supply chain disruption are perceived as the top two industry risks, with more than 65% of the surveyed finance professionals naming them as moderate or high risks. Bankruptcies were also a common concern.
Fewer than one in 10 of the respondents thought that industry risks are decreasing. More specifically, over the past year, finance leaders have become increasingly preoccupied with geopolitical risks, technological disruption, NAFTA renegotiations and the pace of innovation. The Dun & Bradstreet report points out that these four risks may “ultimately hamper customer and supplier viability,” the top two industry risks.
The Reality of Risk Management Strategies
So how are finance functions dealing with these risks? The report findings suggest that many still lack an optimal risk management strategy, in which data management plays a crucial part.
For instance, only one out of five respondents reported that data is fully integrated across the company, whereas it remains siloed for more than 60%. A small percentage of respondents say that their companies do not use data at all for risk management.
Self-created analytics (58%) and credit reports (51%) are the top two most commonly used tools for risk management. Only about a third of the respondents said that they use third-party data, customer master files and economic data, and significantly smaller percentages use machine learning (7%) or blockchain (2%).
Source: Dun & Bradstreet
As the chart above shows, among those who do use these tools, most consider themselves to have a moderately sophisticated grasp of their usage. Fewer than one in five says that their company is “advanced” in their use of modern risk management tools.
Where to Go From Here
The report concludes with three pieces of advice. The first one is for finance leaders to reimagine their approach to risk management. This requires aligning with internal stakeholders, identifying weak areas and coming up with an individualized risk strategy that is both ambitious and sustainable.
“Automate or stagnate” is the second piece of advice. The report cites KPMG’s estimate that 60% of all occupations have at least 30% of activities that can be automated. And last, finance leaders should empower their employees from within by playing the part of corporate “intrapreneurs,” using data insights to boost strategic decision-making throughout the company.
The full report can be found here.
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AP/I2P EPRO SOURCING ANALYTICS10/23/2018
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AP/I2P EPRO SOURCING ANALYTICS10/23/2018
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