CFOs focused on big data

Organizations have long understood that there is value in data but the data capture processes and technologies involved often overlap completely different departments. Tom Bogan of Adaptive Insights argues that the CFO is taking, or at least should be taking, an expanded role in this area. Since organizational risks and financial planning have very large data analysis needs this would strengthen those business needs. 

He references a 2016 report by Adaptive Insights that says, “76% of CFOs say they are currently tracking non-financial KPIs.” Organizations might also compare this information along with the KPMG Finance Benchmark Reports of 2015 and 2016 which show that many finance executives feel their organizations are not producing “insightful” information from the data. 

The article goes on to say, “Ultimately, CFOs need to embrace the role of “chief data officer” and elevate their focus from tracking, reporting, and static planning to continual gathering and prioritizing, ongoing management, and active planning.”

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New 2017 Kroll Report on Bribery and Corruption – Reputation Risks

Kroll Report: only 37% of CFOs maintain active role in developing their anti-bribery and corruption programs. 

Big investments into anti bribery programs is showing a decrease in company’s perceived ABC regulatory risks (Anti Bribery & Corruption) but as the very title of the report indicates the reputational risk to a firm still remain high. A company’s reputation can be at risk even if all practical compliance was met and it is this risk that will be top of mind among the board of directors. Goldman Sachs estimated that reputational risks far outweighed the regulatory aspects. 

As Matt Kelly from Radical Compliance points out, “boards now see compliance risk as a component of the reputation harm they want to avoid at all cost” 

Find the 2017 ABC Kroll Report here

PwC reports – 20 years inside the mind of a CEO

What’s on the mind of 1,379 CEOs around the world? This is the question PwC seeks to answer in their new report. Here are few highlights 

  • 38% are very confident in their company’s 12-month revenue growth prospects
  • 55% are looking for M&A opportunities 
  • 52% plan to increase headcount, but can’t find people with the right skills

    The Enterprise Spend perspective is that revenue growth will lead to more consumption and the related spending. Establishing effective cost controls is much easier during a time of slow consumption. Having that foundation will make the period of growth easier to manage and the data coming out will help future CEOs better plan and predict. 

    Bribery: The Hidden Risk Inside Business Travel Programs

    The following article was published as a 2017 industry trend to watch by the Business Travel News.

    We all know that travel can create tremendous value for organizations. It promotes business relationships, helps companies establish new markets and brings key people closest to the customer – traits that are all essential for having a competitive edge in today’s dynamic market.

    But, despite many company’s best intentions, some business trips are hiding a darker side.  Bad actors within some organizations use corporate travel and expenses to win business at all cost, even if it means bribery and corruption.

    Per the World Bank, “about $1 trillion is paid each year in bribes around the world.” Due to this, governments and trade groups have created hundreds of laws, rules and regulations on bribery and corruption. The US Foreign Corrupt Practices Act (FCPA) is the most well-known.

    The FCPA allows for “reasonable and bona fide expenditures, such as travel and lodging expenses” in limited situations like demonstrations or site visits. However, using travel to hide bribes is a common theme in FCPA investigations. I am personally aware of nine different FCPA cases in 2016 that specifically involved fraudulent trips; two involved domestic travel.

    Despite the global complexity of all these rules governing business expenses, it takes only a single employee for an entire company to be at great financial and reputational risk (see September 2015 Yates Memo). Posting a travel policy that bans bribery isn’t enough. In a case from December 2016 the Securities & Exchange Commission (SEC) stated a company “failed to prevent such payments or detect red flags” despite having a clear policy in place.  

    Failure comes at a hefty cost. Government fines can reach millions of dollars, in addition to the disgorgement of ‘illicit profits.’ One large global retailer has already spent $612 million on internal FCPA compliance costs since 2013, and is now tracking towards a daily cost of $1M.  These are costs the shareholders certainly don’t welcome!  But, worse, it’s the reputational risk that costs the most – this impact can reach 9% of a firm’s total profits for a period over three years’ according to reports from Goldman Sachs and the Economist.

    The risk looks even higher in 2017. Bribery ‘tips’ increased 62% last year, in large part to million dollar rewards from Dodd-Frank’s whistleblower protections. To investigate the influx of leads the FBI launched 3 new “International Corruption Squads” and the Department of Justice doubled the number of corruption prosecutors.

    Domestic travel programs face bribery and corruption risks as well.  In the U.S., 36 states have laws specifically prohibiting commercial bribery, while the Travel Act makes violations of those local state laws a federal crime if the bribery involved travel. The commercial bribery aspect of the Travel Act is a major part of the ongoing case against the world football association FIFA because commercial bribes in connection to New York business trips violated state penal codes. Last month news broke of domestic corruption involving a New York state pension fund manager and a domestic trip to Utah.

    The complexity and global scope of the problem needs a cross-functional approach. A holistic tactic brings together compliance, finance, travel, analytics and even sales functions from within a company. Putting more spend under management and digitally transforming manual processes is critical to establishing what the SEC calls “program effectiveness.” This means fully automating everywhere, not just primary systems in major markets.

    Bribery is a risk that carries a heavy cost. Effectively managing this risk can create a competitive advantage for your organization’s growth.

    Isaac Bowman is a principal at Infosys Consulting, and runs extensive work for his clients in the areas of travel and expense strategy, administration and governance.  He can be reached on LinkedIn or Twitter @isaacbowman where he posts daily on topics of enterprise spend management.