Finance and Accounting

When did CFOs become the guardians of organizations?

In 2019, when a couple of conspirators sent phishing emails to employees of Facebook and Google in the name of Quanta – a company spoofing the Taiwan-based company Quanta Computers – employees from both Facebook and Google ended up depositing more than $100 million in the fake company's accounts. Since Facebook and Google regularly transacted with the tech giant, the gross misappropriation wasn't caught on time.

If you are a finance leader, you would probably cringe at the quantum of the fraud, more so because it involves the Big Tech companies. The obvious question to contemplate is, how exposed are we to such a scam?

In the hyper-digital world, we are living in today, the risk of fraud equates, and sometimes even outweighs, the advantages of technology. In such a scenario, the ledger-bound finance function is increasingly assuming renewed importance to securely support the digital aspirations of businesses worldwide.

The finance function is no more just about analyzing ledgers and reporting results based on back-dated data. A CFO's role, and by corollary that of the entire finance function, has broadened as an enabler of innovation and reimagination of organizations in an increasingly digitized world.  

A crucial aspect that the finance function is having to look at in this digital world is security against the heightened potential for fraud. The Association of Certified Fraud Examiners reports that businesses worldwide lose an average of 5% of their gross revenues to fraud every year. According to the association, 51% of the organizations globally faced a higher rate of fraud since the onset of the pandemic and 71% expect fraud incidents to increase further going forward. In 2020 alone, more than 2,500 cases of fraud came to light for companies across 125 countries, causing a whopping loss of over $3.6 billion. These statistics are worrying, to say the least.

But if the association's analysis is to be believed, and we agree, the presence of anti-fraud controls can significantly lower fraud losses and enable quicker detection. We believe a CFO's role is crucial in perpetuating an affirmative culture organization-wide towards anti-fraud controls to safeguard the need of businesses to adopt technology in line with rising demand from consumers to go digital and contactless.

Control, to set free

Responsible for a company's financial health, the CFO is directly impacted by losses caused by fraud. To be effective against fraud, they must adopt and adapt to the digital tools that modern-day fraudsters often use to be better organized, more aggressive, and more technologically proficient than ever.

Besides assuring peace of mind, safeguarding using technology also brings a competitive advantage by reinforcing the trustworthiness of a brand and elevating the company's reputation in terms of reliability.

Ironically, technology is the best bet in fighting fraud in a heightened technology landscape. The most advanced tools in this battle employ big data, Machine Learning (ML), and digitization. While big data enables the handling of vast troves of information in real-time, ML can be useful in training to be more predictive. These can empower CFOs to go granular in dealing with fraud, by way of scoring and rating external vendors on crucial security parameters for instance.

But leveraging advanced technologies is a part of the sum. Increasing awareness among employees is another crucial part of the sum in the organizational goal of fraud prevention. Providing training to all departments and every hierarchical level within the company, including top management, is important to sensitize each employee in identifying warning signs of potential fraud.

Data comes in the picture

Data is central to this exercise of reinvention and reimagination. More than ever, CFOs are assuming a central role in collecting, organizing, and analyzing this data and feeding insights back into the business for future growth. The CFO thus becomes the guardian of the most valuable asset for a company in today's hyper-digital world – data.

Combine this empowerment of CFOs by data with new-age technology advancements, such as AI, RPA, or Blockchain, and we have a modern-day benefactor to give shape to strategic e­fforts of a company in increasing value, improving efficiency, and enabling superlative user experience. As it is, given their in-depth understanding of the overall business landscape and company-specific strategies, CFOs are well-positioned to oversee digitalization initiatives at the enterprise level.

The recruitment of talent in the finance function must also evolve in tandem with the rapidly expanding role of the finance function in an organization. Dealing with numbers is no more the only prerequisite to being a finance professional. One must also train in managing and cultivating the use of data in conjunction with technology to be successful.

As CFOs increasingly deploy analytical skills in the fabric of an entire organization to drive finance teams to support strategic decision-making, they are more and more becoming akin to business partners. The future where CFOs will be value architects and builders in the digital world, rather than ledger-keepers, is not hard to imagine anymore. They will be the gatekeepers against companies falling prey to highly deceptive fraud such as that that happened with Facebook and Google employees. Guardians of a galaxy, if we may say.

This article was first published by CFO Dive.

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