Senior Executives: How to Manage New Risks
26 April 2009
Read by 2221 persons
In the current economic storm, executives and managers face multiple and new risks. A review with Francis Miard, Director of Protiviti France, a consulting, risk management and internal audit firm.
General Management: Between very short-term objectives and long-term strategy
The first difficulty faced by senior executives is making relevant and quick decisions to face and respond to the brutal changes that are taking place, in the almost total absence of short-term visibility. Senior executives must then switch to "crisis" mode, which involves reviewing their very short-term objectives while remaining within a long-term strategy. They must minimize the impact of the deterioration of the economic climate on results and ensure business continuity while monitoring short-term cash flow. They must also urgently redefine major aspects of their economic model, ensuring overall coherence and the relevance of the necessary changes: product/service portfolio, choice of priority and profitable sales outlets, refocusing of activities, customer retention, or the choice of crucial investments in an environment of limited resources. In addition to this, there may be a pressing demand from shareholders requiring senior management to maintain a balance between these expectations and the medium-term management of the company. They will also have to be attentive to ethical risks and fraudulent practices, which generally increase in the event of pressure to achieve objectives. The main decisions will be the subject of communication aimed at explaining the why and how to the teams and thus showing the way while maintaining motivated teams.
CFO: Cash management, working capital and the reliability of accounts and forecasts
Financial departments are directly subject to a risk of strong deterioration in the company's results. They must also manage the drying up of short- and medium-term financing and the lack of liquidity directly impacting cash management. Limited access to capital and the deterioration of equity also require precise management of cash flows. Finally, they must reduce costs without significantly degrading the quality and control of support processes. In terms of financial management in a crisis environment, financial departments have very limited visibility, which makes reliable forecasting difficult and uncertain, with significant slippage risks that are difficult to communicate to the markets. For listed groups, financial communication is a source of great risks if poorly managed, and can lead to a sudden drop in the share price. Finally, they must maintain perfect control of accounting and financial processes to ensure the reliability of financial statements.
HR: Managing the social climate and retaining talent
Human resources departments face many challenges, including maintaining motivated employees and retaining talent and skills, which are particularly necessary in times of crisis. But they must also, in some cases, manage the very delicate situations of staff reductions linked to reduced activity. Faced with worried teams, HR must increase its communication efforts, maximize employee motivation and loyalty, and identify all signs of deterioration in the social climate. These HR departments must prepare for the future by maintaining a recruitment policy or, at a minimum, a pool of potential profiles in order to closely support the post-crisis restart. A training plan aligned with job changes and the reorientation of their skills will also allow for faster adaptation. HR will ensure that they give meaning, vision and maintain a climate of trust between employees and the company's management.
CIO: Find the balance between cost control and performance.
In times of crisis, information systems become an area of high expectations. The pressure is twofold: in a context of budgetary restrictions, CIOs must find the best balance between cost control and performance, but without impairing the quality and reliability of the systems and information produced, a prerequisite for any decision made by managers. However, due to lack of resources or time, the CIO is placed in a situation of high risk: poor choices of projects to continue or stop, weak management of CIO activities, regulatory non-compliance, or failing management of security and continuity, which constitutes a serious threat in a crisis situation. The CIO must therefore establish itself as an essential player in the company's adaptation to the crisis by ensuring that information systems can support the decision-making and production process. To do so, it can propose rapid adaptation or transformation of IT processes, adopt an effective governance system and ensure that it optimizes its resources by prioritizing its investment projects. It will also monitor the quality of service using "quality" standards, carry out ad hoc audits of outsourced activities and consolidate and integrate security systems.
Internal Audit Directors: Detect losses and fraud... in time
Internal audit departments are faced with new, emerging risks that they must try to detect. The risks of losses or fraud are increasing sharply. They must act quickly to adapt their audit program and refocus it on short-term issues. They must also face and respond professionally and efficiently to the increased expectations of senior management and those of audit committees and the board of directors. The quality of internal control limiting the risks of fraud, ethics and human error will be diagnosed in detail in order to limit the risks of major failures. Finally, in these situations of brutal change, they will have to control their own risk of not having been able to detect major risks that could appear in time.
Posted April 26, 2009
lexpansion.com
General Management: Between very short-term objectives and long-term strategy
The first difficulty faced by senior executives is making relevant and quick decisions to face and respond to the brutal changes that are taking place, in the almost total absence of short-term visibility. Senior executives must then switch to "crisis" mode, which involves reviewing their very short-term objectives while remaining within a long-term strategy. They must minimize the impact of the deterioration of the economic climate on results and ensure business continuity while monitoring short-term cash flow. They must also urgently redefine major aspects of their economic model, ensuring overall coherence and the relevance of the necessary changes: product/service portfolio, choice of priority and profitable sales outlets, refocusing of activities, customer retention, or the choice of crucial investments in an environment of limited resources. In addition to this, there may be a pressing demand from shareholders requiring senior management to maintain a balance between these expectations and the medium-term management of the company. They will also have to be attentive to ethical risks and fraudulent practices, which generally increase in the event of pressure to achieve objectives. The main decisions will be the subject of communication aimed at explaining the why and how to the teams and thus showing the way while maintaining motivated teams.
CFO: Cash management, working capital and the reliability of accounts and forecasts
Financial departments are directly subject to a risk of strong deterioration in the company's results. They must also manage the drying up of short- and medium-term financing and the lack of liquidity directly impacting cash management. Limited access to capital and the deterioration of equity also require precise management of cash flows. Finally, they must reduce costs without significantly degrading the quality and control of support processes. In terms of financial management in a crisis environment, financial departments have very limited visibility, which makes reliable forecasting difficult and uncertain, with significant slippage risks that are difficult to communicate to the markets. For listed groups, financial communication is a source of great risks if poorly managed, and can lead to a sudden drop in the share price. Finally, they must maintain perfect control of accounting and financial processes to ensure the reliability of financial statements.
HR: Managing the social climate and retaining talent
Human resources departments face many challenges, including maintaining motivated employees and retaining talent and skills, which are particularly necessary in times of crisis. But they must also, in some cases, manage the very delicate situations of staff reductions linked to reduced activity. Faced with worried teams, HR must increase its communication efforts, maximize employee motivation and loyalty, and identify all signs of deterioration in the social climate. These HR departments must prepare for the future by maintaining a recruitment policy or, at a minimum, a pool of potential profiles in order to closely support the post-crisis restart. A training plan aligned with job changes and the reorientation of their skills will also allow for faster adaptation. HR will ensure that they give meaning, vision and maintain a climate of trust between employees and the company's management.
CIO: Find the balance between cost control and performance.
In times of crisis, information systems become an area of high expectations. The pressure is twofold: in a context of budgetary restrictions, CIOs must find the best balance between cost control and performance, but without impairing the quality and reliability of the systems and information produced, a prerequisite for any decision made by managers. However, due to lack of resources or time, the CIO is placed in a situation of high risk: poor choices of projects to continue or stop, weak management of CIO activities, regulatory non-compliance, or failing management of security and continuity, which constitutes a serious threat in a crisis situation. The CIO must therefore establish itself as an essential player in the company's adaptation to the crisis by ensuring that information systems can support the decision-making and production process. To do so, it can propose rapid adaptation or transformation of IT processes, adopt an effective governance system and ensure that it optimizes its resources by prioritizing its investment projects. It will also monitor the quality of service using "quality" standards, carry out ad hoc audits of outsourced activities and consolidate and integrate security systems.
Internal Audit Directors: Detect losses and fraud... in time
Internal audit departments are faced with new, emerging risks that they must try to detect. The risks of losses or fraud are increasing sharply. They must act quickly to adapt their audit program and refocus it on short-term issues. They must also face and respond professionally and efficiently to the increased expectations of senior management and those of audit committees and the board of directors. The quality of internal control limiting the risks of fraud, ethics and human error will be diagnosed in detail in order to limit the risks of major failures. Finally, in these situations of brutal change, they will have to control their own risk of not having been able to detect major risks that could appear in time.
Posted April 26, 2009
lexpansion.com
