Self-Service Data Analytics and Governance for Managers by Nathan E. Myers & Gregory Kogan

Author:Nathan E. Myers & Gregory Kogan [Myers, Nathan E. & Kogan, Gregory]
Language: eng
Format: epub
ISBN: 9781119773306
Publisher: Wiley
Published: 2021-06-02T00:00:00+00:00

Setting Risk Appetite in an Environment of Changing Performance Expectations

To better understand the risk environment in core enterprise systems and connect risk to performance, let's examine the performance expectations of accounting systems. Previously, the performance expectations from accounting systems and the CFO organization had been to provide reliable information that is timely and free of error, in a relatively static format, for management stakeholders. Now, expectations on the function overall have shifted significantly. Not only must reporting integrity be preserved, but there is an increased emphasis on capturing efficiency from the acceleration of routine processes to allow for the recapture of bandwidth and more strategic deployment of people resources. The discovered bandwidth is subsequently rededicated to unlocking further value from data and for enhanced decision-making, leading to innovative new deliverables, and further processing evolution. The processing chains drift to produce more valuable outputs and evolve to produce them more efficiently and methodically – in a continuous cycle, growing ever more valuable and efficient with each revolution. This represents a powerful shift for accounting professionals, as those previously viewed as value stewards are now driving value creation. Accordingly, with the widespread adoption of data analytics in furtherance of this goal, the implications of heightened functional performance expectations must be reflected in an adapted risk governance strategy.

The changing performance expectations for enterprise functions are likely to impact the balance of component risks within the organizational risk profile. To demonstrate, let's examine the embedded risk appetite within the systems environment. We take it as a given that some likelihood of processing error may be acceptable (though not desirable), in a given system or the system environment, as a whole. Note that companies have three levers at their disposal to reduce the risk introduced by systems: money, time, and development resources (see Exhibit 5-1 regarding Risk and Value tradeoff considerations). Assuming thoughtful management consideration, that such systems persist and live on, in spite of the risks introduced by them, implies that the level of risk is acceptable and in line with enterprise risk appetite.

EXHIBIT 5-1 Risk and Value Considerations as Relates to Analytics and Automation

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