Businesses need to work harder to spread responsibility for risk management across the whole organisation, according to a new report from ACCA (the Association of Chartered Certified Accountants).
The survey of more than 2,000 ACCA members found accountants at the business coal-face have a vital role to play in successful risk management, and that they stand ready to do more.
The survey also found a statistical link between the use of accounting practices that contribute to managing risk and lower occurrences of dysfunctional behaviour. The survey also found differences in the perception of a company’s exposure to risk between those at board level and those accountants working below board level.
‘Risk happens at all levels of business,’ says Paul Moxey, head of risk management and corporate governance at ACCA. ‘It doesn’t sit in silos. Risk management needs to be something undertaken by everyone in an organisation so it is fully integrated.
‘The survey shows accountants have an excellent grasp of the risks faced by their organisation and the steps needed to manage those risks. The survey also shows clear support among accountants for ‘challenging senior people’ as being part of good business culture. Accounting is really about providing information to help make good decisions, and good decisions mean less risk. The accountant’s day-to-day role is all about managing risk, even if people don’t think about what they do in that way.
‘The results are both encouraging, in terms of what accountants do and would do more of, and frightening in terms of the extent of dysfunctional revealed. There is a big problem to be addressed. Businesses need to make sure they use the risk awareness and risk management skills of their qualified accountants, and not miss an opportunity to effectively integrate risk management.’
The value of accountants’ contributions can be lost through their misuse. Accountants in the survey reported very high levels of ‘bad behaviour’ around risk management. Examples include frequent ‘gaming’ of forecasts, providing optimistic versions to avoid criticism or pessimistic ones to reduce expectations. Only 1% of respondents reported never seeing any of the bad behaviours asked about in the survey at their organisation.
However, the survey did find a statistical link between the use of good risk management practices by accountants and incidences of dysfunctional behaviour: More good practices correspond with less dysfunctional behaviour. Types of good practice include aspects of management accounting, forecasting, reporting and quality controls, decision support and controls over wrongful behaviour. Accountants who thought dysfunctional behaviours most widespread, most wanted to make more use of the good practices.
Some of the highest scores for good practices were from small organisations. Their stereotype as unsophisticated is perhaps an oversimplification.
The survey also found those in more junior roles are more aware of both risks and ‘bad behaviour’ than their board-level colleagues.
‘Non-execs were more likely than anyone else to identify ‘personality’ factors – such as planned dishonesty or the opportunistic abuse of power – as causes of problems rather than more controllable factors, such as financial pressure on an organisation’ explains Paul Moxey. ‘They were also much more optimistic about the frequency of ‘bad behaviour’ than anyone else, and were more enthusiastic about management tools the survey shows to have debatable effectiveness, such as budgetary controls.
‘It may be because senior levels are less involved in the day-to-day running of the organisation, or because they’re taking a broader view of the business. It might be the way information is reported to them needs to be improved.’
The survey findings have been used by ACCA to develop an online ‘risk healthcheck’ for businesses. Using this resource, businesses can compare themselves to the practices and experiences of businesses from the survey, and identify areas for improvement.
Paul Moxey concludes: ‘This is a very timely report as now is a critical time for risk management. The financial crisis highlighted the disastrous consequences of senior management effectively ignoring risk management. Risk management has since risen up the agenda, but its importance hasn’t always been reflected in budgets or actual actions and there’s a danger it will be forgotten about once the current crisis has passed. Businesses need to take this opportunity to properly integrate risk management into their business processes.
‘Integrated risk management is vital for any business that wants to pursue sustainable growth. We hope businesses take advantage of the insights on offer as part of the ‘healthcheck’.
For further information, please contact:
Nick Cosgrove, ACCA Newsroom
+44 (0)20 7059 5989
+44 (0)7963 496144
Notes to Editors
- ACCA’s website dedicated to Risk and Reward can be found in the 'Related Links' section to the left of this article.
- ACCA (the Association of Chartered Certified Accountants) is the global body for professional accountants. We aim to offer business-relevant, first-choice qualifications to people of application, ability and ambition around the world who seek a rewarding career in accountancy, finance and management.
- We support our 147,000 members and 424,000 students in 170 countries, helping them to develop successful careers in accounting and business, with the skills required by employers. We work through a network of over 80 offices and centres and more than 8,500 Approved Employers worldwide, who provide high standards of employee learning and development. Through our public interest remit, we promote appropriate regulation of accounting and conduct relevant research to ensure accountancy continues to grow in reputation and influence.
- Founded in 1904, ACCA has consistently held unique core values: opportunity, diversity, innovation, integrity and accountability. We believe that accountants bring value to economies in all stages of development and seek to develop capacity in the profession and encourage the adoption of global standards. Our values are aligned to the needs of employers in all sectors and we ensure that through our qualifications, we prepare accountants for business. We seek to open up the profession to people of all backgrounds and remove artificial barriers, innovating our qualifications and delivery to meet the diverse needs of trainee professionals and their employers.