Part 1 of 4: The Future of Risk Management
How can finance, credit, and risk leaders make their best decisions in 2018 and beyond, given the economic turbulence that exists in the world today? To me, the answers are unexpected. Given the disruption that is occurring within the broader business world and the economy, the way that decisions are made must also be ever-evolving. Modern corporations are looking to finance teams to make sense of this data and drive growth and innovation through intrapreneurship. Being a modern finance leader isn’t for the faint of heart.
The opportunities that economic change and technological advancement are bringing to the field of finance—from automation to machine learning, to AI to digital finance--are ever-evolving and unfolding before our eyes. “We live in a world filled with lots of information that's changing. And there's somebody who just wants the answer, but the world is changing while we're trying to produce the answer,” remarks Dun & Bradstreet’s Chief Data Scientist, Anthony Scriffignano.” Finance leaders have an opportunity to be present and lead in the space of the ever-evolving search for these answers.
The advancements occurring in technology and data dissemination now give us the power to have a cutting-edge understanding of edge understanding of our customers, suppliers, and partners. Legacy scores, ratings, and analytics are evolving to include new sources of data that can paint a clearer picture of how businesses are actually operating. Many companies now have the ability to build detailed, predictive models that show them which customers are the most likely to make a purchase and when—and which business relationships pose the greatest risk. Smart segmenting, using this information, has the potential to help cross-functional teams predict cross-selling and upselling opportunities within their current customer portfolio.
By embracing the state of constant change, enterprise credit and risk leaders can bring their organizations toward a greater source of truth by leveraging data-driven insights to find paths toward sustainable growth.
The World at Large: A State of Constant Change
There’s an unprecedented amount of economic change and uncertainty that businesses face today, seemingly from all angles. Dun & Bradstreet’s executive economists predict a year of slow growth in 2018, underpinned by many political and macroeconomic risks and increased volatility.
Much of that volatility stems from globalization and, recently, ‘de-globalization.’ As risks such as cyber dependence, social tensions and warfare in various areas such as the Middle East, shifts in trade policies, and disruption in oil supplies play out, it’s important for business leaders to understand how these events may affect long-term strategy.
The scale of these changes happening all at once, across multiple functions, has created an enormous opportunity and challenge for credit and risk managers. Finance leaders are now expected to understand the implications of everything from technological innovations to security, policies, politics and more in a constantly changing risk environment.
While there’s no one-size fits-all solution, there are 3 key areas finance leaders can and should focus on to create and sustain business growth in this shifting landscape:
1. Reimagine and rethink your approach to risk management.
The days of relying on an industry playbook for defining risk are over. Globalization and digitization have created an enormous amount of variability in finance. While there are certainly industry-wide patterns that risk managers can look to, the most valuable data that the customer-centric organization has for defining risk is within their own customer, supplier, and partner portfolios. By combining global and industry data with customer portfolio data, finance leaders can begin to tailor a sustainable risk strategy that’s designed to meet to their business goals.
2. Prevent stagnation with automation.
Relying too heavily on manual processes can easily lead to a stagnation in growth—especially in today’s rapidly shifting environment. If those processes are not driven and informed by insights from data, the implications are manifold. Automation, fueled by insight, can not only reduce operational costs, it can help open new avenues of growth for finance and credit teams by scaling and pulling in data from multiple sources at once. As entire industries and businesses—large and small— go digital, there is more data available today than ever before. Plus, the addition of the Internet of Things has redefined where and how data insights can now be collected. This has created new segments of business insights that span from the supply chain to the retail floor and in some cases to devices in the customer’s home. Without automating some of the processes to gather and understand this data for decision-making, the ability to harness insights and act on them becomes nearly impossible. Humans alone can’t act quickly enough to make the most of the data available.
3. Use data to empower organizations from within.
The influx of data has put finance leaders at the center of their organizations in a new role as corporate intrapreneurs. Finance leaders now play a part in pioneering technological innovations that have an impact company-wide—from marketing to IT, revenue generation and more. The visibility that credit and risk data can bring to the organization uniquely positions them to lead cross-departmental collaboration and strategic decision-making. Finance leaders who take advantage of this opportunity can implement a cross-functional data strategy to help their organizations better navigate changes in the market. The challenge for finance teams is to make data insights readily available across teams.
What’s next? Embracing uncertainty and opportunity.
The speed of global economic shifts—from new technologies to changes in trade policies and government—has both positive and challenging implications for finance leaders. On one hand, the uncertainty creates a market environment that hurts bottom lines and puts stress on current systems. On the other hand, it’s an exciting opportunity to evolve and build next-generation systems that drive growth and innovation.