ERM Growing Concern for CFOs, Audit Committees
Enterprise risk management (ERM) is a growing concern and the biggest challenge for Chief Financial Officers, Audit Committee Members and Chief Audit Executives (CAEs). That’s according to three new surveys conducted by Crowe Chizek and Company LLC - one of the top 10 public accounting and consulting firms in the U.S. “The common theme in the surveys suggests the need for more collaboration between finance, audit committees and CAEs,” says Rick Julien, a Crowe Chizek Risk Services Executive.
The scope of responsibilities and strategic importance of internal audit departments are expanding as well. Audit professionals are increasingly expected to move beyond compliance and financial reporting responsibilities to focus on business and operational risk as the credit crunch shows no sign of letting up according to the yearly annual Audit Committee Member Survey conducted by KPMG’s Audit Committee Institute (ACI). Oversight of information technology (IT) risk, in particular, has emerged as a high priority. Amid the change, internal audit has become a “valuable rung on the leadership ladder,” according to CFO.com.
Moreover, the American Institute of Certified Public Accountants (AICPA) contends that the volume and complexity of financial and non-financial information will continue to expand along with the need for accountants and auditors to interpret and analyze data and participate in the decision-making process. As a result, hiring qualified professionals remains the most critical concern for U.S. firms.
Amid the growing trend, accounting jobs are opening up, according to executive search firm, A.E. Feldman. Firms are adding staff to address the increased emphasis on risk management as well as mounting resource demands. Now, as firms step up to meet these challenges, A.E. Feldman, says audit jobs exist for candidates who can evaluate and participate in the improvement of clients’ risk management, controls and governance processes through the use of strategic and technical expertise.
Financial Execs Focus on Risk
Crowe Chizek and Company LLC has released data from three surveys revealing the importance of enterprise risk management (ERM) to CFO’s, Audit Committee Members and CAE’s. The surveys polled more than 780 respondents from a broad spectrum of public and private companies, with revenues ranging from $100 million to more than $10 billion.
The surveys found that more than 65% of Chief Financial Officers and 70% of Audit Committee Members cited managing enterprise risk as the biggest challenge for their organizations over the next 12 months. According to those surveyed, ERM was considered an even bigger challenge than improving financial reporting and improving internal controls for CFOs.
Among the surveys’ findings:
- M&A, divestiture or restructuring topped the list of changes that would put the most strain on risk management—even more than the weakening United States’ economy.
- More than 30% of CFOs say they have been disrupted by financial and operational surprises in the past year.
- More than 40% say they are substantially concerned about market, financial and technology risk factors during the next year.
- It was reported that 21% of the finance teams will devote much greater attention on companywide risk management, with 75% reporting at least moderately more.
“We felt that limiting the survey to just one group wasn’t going to give us the whole picture, “said Jonathan T. Marks, an executive with Crowe’s risk services group, which was instrumental in developing the surveys. “These results showed us that enterprise risk management has become a huge challenge for those charged with managing a company’s financial health, with many looking for guidance on the next steps they should take.”
Results of the surveys also show there is also room for improvement in the various components of understanding and managing risks. When asked about specific risk management tasks, less than 25% of senior finance executives felt that their company’s performance was excellent on any of the tasks.
Challenges Facing Audit Committees
Audit committees face specific challenges regarding risk-related activities, according to Crowe. The firm’s surveys find the Chief Audit Executive (CAE) serves as an indispensible resource for helping audit committees fulfill their responsibilities regarding risk oversight. Overall, 74% of Audit Committee Members rated their CAEs as “very effective.” Less than 43%, however, percent perceive their CAE as “very effective” at conducting risk assessments, and only 41% give high marks to their CAEs on evaluating governance and ERM processes.
“There are still many challenges on the enterprise risk management journey, including making the link between audit committees, CAEs and CFOs stronger,” notes Julien.
A.E. Feldman’s accounting division is constantly researching industry trends and developments. To learn more about these issues or inquire about existing and future job opportunities in finance and accounting, contact A.E. Feldman’s President, Mitch Feldman, and the firm’s cutting edge accounting recruiting team here.
