MD: Genesis Corporate Solutions
I often talk about risk management and how it is becoming an essential component in any business. The problem with risk management is that you usually plan to mitigate unseen and unpredictable risks. Risks that may or may not occur and may or may not impact your business. These are a lot of unknown variables.
However, not all risk planning involves unknown variables. Chief Financial Officers are experts at risk planning and oversee an important job function within companies. Ninety per cent of financially distressed companies find themselves in that position because of mismanagement; address this, and you can focus efforts on turning the company around to find growth in a constrained market.
How do companies go about this? I recently read an article on the cfo.com website which discusses this in more detail.
Enhance Due Diligence During Hiring
The article points out that traditional background checks, which typically involve checking criminal records and verifying qualifications, no longer suffice independently. Modern companies need to leverage digital solutions that compliantly delve deeper into the places where misconduct presents itself in 2023: the digital persona.
A holistic approach to hiring is crucial because it can unearth patterns that may suggest a propensity for misconduct. Using such digital tools, which are typically AI-enabled, can help hiring managers make more informed decisions about who they bring on board and how to cultivate a safe, respectful, and accountable workplace which makes a huge difference to a company’s bottom line.
The article adds that, simultaneously, using a reputable third party to conduct the candidate online check protects all parties in the hiring process. How? It prevents a hiring manager from seeing protected class information about a candidate (like pregnancy, religion, disability, or more), which could create bias.
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Robust Reporting Mechanisms
Encourage a culture of openness and transparency by implementing robust reporting mechanisms for misconduct. Give employees multiple, easy-to-access channels to report any workplace misconduct, thus ensuring red flags aren’t ignored and don’t go unanswered either.
Regularly review these reports and take swift, appropriate action. Transparency and immediate action are key to mitigating risks and preventing even bigger issues from arising.
Prioritize Internal Training and Workshops
The CFO article points out that one of the most effective preventative measures against misconduct is regular training and workshops on acceptable workplace behaviour, ethics, and company policy. This also ensures internal alignment, which is really important not only for day-to-day operations but also for hiring.
When your whole organization is aligned on the proper code of conduct, you know what to look for when bringing on someone new. Make sure that every employee, regardless of their role, is familiar with the expectations and consequences related to workplace behaviour.
Risk Management Framework
The article adds that CFOs should work closely with their legal, human resources, and talent acquisition teams to develop a comprehensive risk management framework. This should include policies for hiring, reporting misconduct, investigating reports, and, most importantly, how to take corrective action.
This not only ensures compliance but also protects the company and its executives from personal liability, protecting your business from following in the footsteps of McDonald’s recent major misstep. Note that you should continue to keep this plan updated as regulations and industry standards evolve.
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Increased accountability
Increased accountability lies at the heart of this type of risk management. Making people accountable for their actions focuses their thoughts on value and the bigger picture of providing this to consumers and shareholders.
Imagine how different the Steinhoff saga would have been if adequate risk management controls had been in place to address the problem when it first arose. Imagine the value-based discussions we would be having if other high-profile business rescues that turned into liquidations were stopped in their tracks.
This also provides a platform to have other important discussions within the business. These include the implementation of an independent business review which will then detail the areas of the business that need urgent attention. Increased accountability will also enhance the implementation of these projects
If South Africa is going to recover from this economic crisis, and if CEOs are going to take centre stage when it comes to driving this growth, then the risk management agenda needs to shift towards CFOs who increasingly will engage with CEOs on critical issues that will focus the company’s value discussions.
Phahlani Mkhombo is the MD of Genesis Corporate Solutions.
