Finance departments lament loss of control over daily workflows

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LONDON – A failure to keep up with day-to-day workflows of information within investment bank finance departments is causing dilemmas over how best to address problems, while avoiding the pitfalls of financial, legal and reputational risks.

According to research by operational control software and consultancy firm Business Control Solutions (BCS), 94% of respondents struggle to keep pace with departmental workflows.

Mike Bush, head of product development at BCS, says:“In a global organization, there are hundreds of thousands of accounts spread over multiple regions, general ledgers and business units, with more being opened each day to support new business opportunities. Without a structured control framework, more people with higher skill levels, and therefore higher costs, are required to manage the process effectively.”

This problem is leading to more time being spent on processing the numbers instead of on analysis, with a consequent loss of control, increasing demands for offshoring to save costs and save time for the crucial business of analysis.

“We have seen more operations processes being offshored over the past five to ten years but finance has lagged behind this trend due to the reliance on resources with an appropriate level of accounting skill combined with intimate, personal knowledge of the accounts. Without suitable controls and the retention of onshore accountability, the value of offshoring a finance process will be negated by the risk of using a potentially less skilled workforce with no history of the accounts,” says Bush.

Further up the chain, the costs, and negative market effects, of errors may be serious. Credit Suisse’s problems this year – having to re-evaluate its figures leading to significant writedowns – highlight the risks when the wrong numbers are published.

Although finance directors and chief financial officers (CFOs) may be directly accountable for their monthly sign-offs, the errors will have already occurred and lost within millions of transactions that make looking at the individual accounts, by that stage, impossible.

“If you force them to be accountable all you are doing is forcing them to sign off a set of accounts that they may not trust. There should be more focus on measuring the risk and control from the point of the primary account owner initiating the reconciliation right through to the final sign-off by the CFO or finance director,” says Bush.

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Investment banks: the future of risk control

This survey report explores the current state of risk controls in investment banks, the challenges of effective engagement across the three lines of defence, and the opportunity to develop a more dynamic approach to first-line risk control

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