Businesses need to work harder to spread responsibility for risk management across the whole organization, according to a survey of more than 2,000 members of ACCA (the Association of Chartered Certified Accountants).
“Risk happens at all levels of business,” said Paul Moxey, head of risk management and corporate governance at ACCA. “It doesn't sit in silos. Risk management needs to be something that is undertaken by everyone in an organization so it is fully integrated.”
Accountants in the survey reported very high levels of “bad behaviour” around risk management, such as frequent “gaming” of forecasts, providing optimistic versions to avoid criticism or pessimistic ones to reduce expectations. Only one per cent of respondents reported never seeing any of the bad behaviours asked about in the survey at their organization.
“The results are both encouraging, in terms of what accountants do and would do more of, and frightening in terms of the extent of dysfunction revealed,” said Moxey. “There is a big problem to be addressed. Businesses need to make sure they use the risk awareness and risk management skills of their qualified accountants, and not miss an opportunity to effectively integrate risk management.”
Those in more junior roles are more aware of both risks and bad behaviour than their board-level colleagues, found the survey.
“Non-execs were more likely than anyone else to identify 'personality' factors — such as planned dishonesty or the opportunistic abuse of power — as causes of problems rather than more controllable factors, such as financial pressure on an organization,” said Moxey. “They were also much more optimistic about the frequency of 'bad behaviour' than anyone else, and were more enthusiastic about management tools that the survey shows to have debatable effectiveness, such as budgetary controls.”
That may be because senior levels are less involved in the day-to-day running of the organization or because they're taking a broader view of the business, he said.
“It might be that the way information is reported to them needs to be improved.”
However, there is a statistical link between the use of good risk management practices by accountants and incidences of dysfunctional behaviour, found ACCA, as more good practices correspond with less dysfunctional behaviour. Types of good practice include aspects of management accounting, forecasting, reporting and quality controls, decision support and controls over wrongful behaviour.
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