Experts reveal how agility has been one of the drivers of success in business this year.
Improving risk management
LexisNexis SA’s GM of compliance Greg Chamberlin (pictured above) says that successfully navigating from the new normal to the next normal will require executives to focus on improving risk management and their agility to gear up for future unexpected risk. They will need to conduct a re-examination of capacity and capability in order to reshape operations, as well as a radical rethink of ideas, technologies and innovations.
In the new post-Covid-19 model, firms that are empowered by digital technologies will be better positioned to satisfy year-end reporting requirements and to remain compliant, while meeting the needs and expectations of their customers.
Greg says those preparing for the uncharted territory of a financial year-end audit amid Covid-19 need to do the following:
1. Review internal controls
Record the differences in controls set in place for the business before and during the Covid-19 crisis, in order to expedite the audit process. Pay close attention to any impact relating to financial reporting and risk identification and assessment. For example, new or adapted controls may have been implemented as entities enabled remote workforces and ICT resources, and any breakdowns in internal controls over financial reporting may have presented opportunities for fraudulent financial reporting or misappropriation of assets.
2. Enhance digital capabilities
Technology offers the potential of innovation and the promise of efficiency which, when embraced, could enable financial services institutions to streamline some of the processes involved in auditing, reporting, information management as well as risk identification and mitigation.
Technology solutions help to fill compliance gaps, reduce costs, get ahead of requirements and detect enterprise risk. They are a means of simplifying the process of audit compliance for firms, automating procedures that were formerly done manually, and streamlining processes to reduce both business risk and the load on human resources.
The latest Global CEO Survey published by PwC showed that in financial services, 70 percent of leaders believed the speed of change in technology was a concern, reflecting the urgent attention needed in this area.
3. Embrace the tools and platforms available to support the audit process
There are numerous collaboration and workshop facilitation tools to help with virtual risk assessments, audit discussions and quality assurance – from remote meeting and video conferencing, to using online knowledge repositories, audit systems and cloud-based file sharing.
4. Review cyber-security
Cyber-security will be one of the top risks facing businesses in 2020 and beyond. The global outbreak of Covid-19 and increased remote working has resulted in weaker cyber-security measures and skeleton staff often operating under severe stress and general distraction, with reduced oversight, creating loopholes for cyber-criminals, scammers and fraudsters both internally and externally. Now, more than ever, firms need to beef up their cyber-defences and educate employees at all levels to the emerging risks.
5. Leverage data analytics
With customer data intelligence considered among the most important predictors of revenue growth and profitability, financial services and auditing firms cannot delay investing in more advanced data analytics to better anticipate potential risks and client needs.
6. Stay abreast of regulatory change to identify non-compliance with laws and regulations
Companies must adopt systems to address and manage the raft of new rules put forward by global, regional, and national bodies. Covid-19 and the associated rapid adoption of pandemic-related legislation and regulations can present a heightened risk of inadvertent non-compliance that could materially affect the financial statements.
The need to reimagine the workplace
RedPanda Software CEO Gareth Hawkey says we can’t apply old ways of doing things to new problems.
Given the economic challenges that lie ahead, and the need for a dynamic and rapid recovery, Gareth says there are three ways in which business and finance leaders can approach the task of re-invention with new, Covid-19 eyes. These are;
1. Support other businesses (this is an ecosystem!)
As individuals, households and businesses, we rely on the communities around us to flourish and grow. If we allow other businesses to sink in the aftermath of the lockdown, this will quickly affect our own growth prospects and sustainability.
We need to retrain ourselves to view every business contractor, customer, etc, as part of a fragile yet dynamic ecosystem – and an ecosystem which requires the strong or stable to support the weak or unstable in difficult times, he notes. From a practical perspective, this means that finance teams need to relook at existing contracts, agreements and engagement models, and really question if these are still relevant and if they are nurturing the wider ecosystem. Are these agreements putting any businesses or stakeholders at a disadvantage? Could a few small, contractual changes help a struggling supplier or customer?
Today, those who try to hold on to the past will be judged accordingly, such as a resistant commercial landlord who is still forcing struggling businesses to pay rent they can no longer afford. Now is the time to devise and innovate around solutions that will enable the greater ecosystem to survive – even if this means less profit for the bigger players for some time.
2. Begin to plan for many different and wide-ranging scenarios
While finance teams may be used to planning and forecasting along very specific sets of parameters and possibilities, now is the time to widen this range and work with leadership teams to develop many more scenarios – and proactive responses to each scenario. Without doubt, the pandemic has revealed gaping weaknesses within business continuity planning, and the inability to adjust to different outcomes.
Finance and business leaders should be revamping these models and placing emphasis on more proactive and thorough scenario planning and strategy. Key strategic questions should include, for example, “What happens if we have another peak?” and “What happens if this peak leads to a large number of deaths, or civil unrest?”
Do your teams have a detailed understanding of how these scenarios would affect the business, and what steps could be undertaken in response? Businesses should be laying the groundwork now, and upskilling around strategy and business continuity to cope with more global volatility.
3. Drive new ways of communicating (Zoom is not a strategy!)
With the shift to remote working, which for many businesses and teams will be permanent, CFOs are highlighting a major business risk: the loss of a cohesive organisational culture, which for finance teams can inhibit their ability to support the business. Yet leaders can mitigate this risk by being more deliberate and proactive around communication, asking questions such as: “How can we translate the physical
meetings/conversations/brainstorming sessions into something that is social, engaging and meaningful online?” and, “How can we overcome the hesitancy or inertia that many team members experience when required to videoconference or ‘meet’ online? How can we break down those barriers?”
Creative and agile, yet rigorous on risk and execution
Herman Singh, the CEO of Future Advisory, advocates for ambidextrous organisations, saying that corporate organisations of the future need to act like a boxer who can box on either foot.
Herman says only a small proportion of the world’s population are ambidextrous! Eighty-seven percent of humans are right hand dominant and 11 percent are left. Only two percent are both. This plays out very interestingly in the world of business and life in general.
He says an ambidextrous organisation is one that can be both agile and creative on “the one hand” and yet be rigorous with a focus on risk mitigation while delivering industrial strength execution “on the other hand”. It is the exceptional firm that has an executive who can both build and run a conventional business on the one hand and simultaneously disrupt it, as Elon Musk is doing.
The key to building ambidexterity is to move decision making on resource allocation to those who are most motivated for success of the overall business and not just the legacy one. This becomes increasingly important as the once nascent business rivals the existing one and the battle for resources ensues. It is the wise board that recognizss the need for an investment portfolio approach where one harvests the legacy business and invests in the future stars. The harvested business is very unlikely to make that decision on its own especially as it may lead to a disinvestment in its own business over time.
Seeing the opportunities the pandemic presents
Tom Wells, chief disruption officer of Synthesis Software Technologies, says Covid-19 provides an opportunity to transition towards a more digital, remote and dynamic workplace.
Tom says, “I’ve often imagined the workplace of the future, and in my mind, it’s something disconnected from physical boundaries, highly decentralised and highly dynamic, where people come together loosely, work in a tightly connected communication mesh, which is then dissolved rapidly and the people move on to other things as quickly as tasks are completed.”
The opportunity in this whole process is the ability to test this transition towards something that is more digital, more remote, and allows for a more dynamic workplace. It is possible that it will not work. If so, we take this experiment as a failure and revert to something that looks a whole lot like the old way of working as soon as Covid-19 passes.
However, imagine if this does actually work, he says, and in fact, we realise that this style of working is much better. Imagine we increase productivity! Imagine our deliverables are better, and that our customers are even happier! Imagine we have even more freedom to choose who we work with and for. This right here is the opportunity to take companies to the next level.
He says Synthesis has always been in command of its own destiny; never scared to try new things. And generally, those new things work out for the best. “I really hope that this particular challenge is just another one of those new things that digital companies will embrace in order to create new opportunities and succeed,” he says.
Returning to work
UCT GSB’s Dr Tim London says that while it’s possible to predict some trends for specific organisations or industries, there is no clarity on how the world in general will look in a few months’ time. “What leaders can do right now, however, is look ahead at how their organisation is likely to respond to its own re-opening. The exact conditions might differ, but the broad strokes will be the same for virtually every organisation returning from the trauma of Covid-19; the main issues to consider can be neatly encapsulated with the metaphor of someone returning from a significant injury.”
Tom asserts that the impact of Covid-19 and attendant global lockdowns, along with the obvious damage both have done to just about every facet of human life, makes it clear that we are suffering through a crisis and not just a run-of-the-mill bad stretch. In our “injury” metaphor, this is not a sprained ankle, this is a torn ACL or broken leg that needed to be surgically repaired.
He points out that with significant trauma, there are the obvious effects business owners can readily recognise: the loss in revenue, fractured supply chains, or necessary lay-offs. Just as obvious to many leaders will be the scars left following those traumas: uncertainty among staff returning to work, increased debt obligations, or the loss of suppliers.
The athlete suffering significant injury can do the same: easily feel the pain in their knee and weakness in the joint; as they recover, the scar on their knee will be visible as well as swelling around the joint.
Crucial to moving on will be telling a new story about your organisation: hopefully your purpose (why your organisation exists) and values (what’s most important in your organisation) will remain, but you’ll need to co-create a new narrative that makes it clear that you’ll be doing things in new ways to be relevant in the new reality. This is essential, since without a new story for how you’ll be progressing, there will be an overwhelming push (both consciously and subconsciously) to get back to the “good old days”, which no longer exist.
Tim says, “There is no easy way back from the current crisis, but leaders who are thinking beyond just ‘back to business’ and instead exploring with key stakeholders the question of ‘How can we still be top of our game in a new way?’ will be the ones who find their scars are reminders of how they’ve improved rather than damage that holds them back.”