According to a study by IBM and the Ponemon Institute, the average cost of a data breach to organizations was $4.45 million in 2023. Another study by the Verizon Data Breach Investigations Report in 2023 found that 95% of the attacks are launched for financial gain, not for political or personal agendas (according to Oracle).
In the world of finance and accounting, CFOs play an important role in risk management. From overall financial compliance to the IT department, a CFO is the first line of defense in establishing and maintaining an adequate amount of risk management and mitigation for modern-day organizations. There are a lot of complexities in the accounting infrastructure. From a lack of internal controls to phishing and impersonation – the risks are many. Small or medium firms often do not have the means to hire a full-time CFO. In such cases, outsourced CFOs can be charged with understanding and mitigating the risks that your organization faces.
Understanding Regulatory Clashes
One of the common problems that business leaders face is that of regulations. When firms fail to comply with relevant regulations, they can face legal and financial penalties. They can also fall prey to loss of face. These clashes happen due to a lot of factors. These include:
- Lack of awareness: Firms may not be completely aware and in line with the regulations that apply to their operations. This is often because they do not have a team to keep them updated.
- The complexity of the regulations: Regulatory requirements are often complex and challenging in nature. They can be difficult to interpret. This is especially challenging for novice owners.
- Frequent changes: Regulations are updated frequently and keeping up with them can be almost impossible for any business, unless you have a dedicated team to look after this.
- Resource constraint: Smaller and mid-size businesses often lack the resources that can be dedicated to compliance efforts.
How can an outsourced CFO help mitigate the risks associated with regulatory compliance?
The business landscape, today, has become volatile and uncertain. Organizational leaders have to make conscious efforts and choices to consider the risk-return trade-off when a risk emerges. Strategic risk management is one of the key roles that the CFOs play. They need to make sure that the response procedure is in place much before an unfortunate incident happens. An outsourced CFO can help mitigate the risk of regulatory clashes through a combination of proactive measures, ongoing monitoring, and strategic planning. Some of the major ways for CFOs to tackle this include:
- Proactive compliance management: Outsourced CFOs are adept at handling regulatory risks and clashes. By conducting regular audits, outsourced CFOs can ensure compliance with all the the relevant regulations. They can help develop comprehensive compliance checklists that are uniquely tailored to your industry, processes, and operations. It can be difficult for the firms to develop training and education for the teams. Educating the company’s internal staff on ongoing regulatory requirements and compliance best practices can relieve the leaders of the stress of managing crises.
- Staying updated with the changes: One of the key necessities in the accounting and finance industry is to keep abreast of the changes in regulations. There is a need to constantly update the team members and modify the policies. Outsourced CFOs can help provide regular updates to the company on new and upcoming regulations that impact internal operations and the client side. They can also help maintain constant communication with regulatory bodies to stay informed about compliance requirements.
- Executing robust control controls: While many believe that outsourcing CFO services can be detrimental to firms, the impact is quite the opposite. Outsourced CFOs can help establish a robust internal control framework to prevent non-compliance and financial irregularities. They also conduct risk assessments for the firms to identify potential risks and implement strategies that could help make a difference. Implementing measures to prevent and detect fraud can help businesses avoid regulatory clashes at all levels.
- Strategic financial planning: The impact of regulations on an organization’s financial performance and strategic plans is immense. Outsourced CFOs can help with the allocation of resources to tackle compliance-related activities within the organization. All this while keeping in mind that the firms can meet the budgetary obligations too. They can also help develop scenarios and contingency plans to address potential changes and their impact on the business. Scenario planning also plays an important role in helping organizations prepare for low times.
- Use of technology to curate risk mitigation: Technology in accounting should be used to make the job of an accounting professional easy. Firms sometimes might find it difficult to adopt technology during adaptation, integration, or training of the teams. With outsourced CFOs, firms get access to compliance management software to automate and streamline compliance processes. Using data analytics to monitor compliance and identify trends and patterns can help indicate potential issues. They also help in maintaining accurate and up-to-date digital records to keep track of all compliance-related activities.
Outsourced CFOs and mitigation of regulatory clashes – End Note
Outsourced CFOs are experts in risk management and mitigation. They help organizations protect data and be prepared for different kinds of situations. They also help organizational leaders remain the watchdog even when they aren’t able to be at the top of things themselves. An outsourced CFO helps businesses of all sizes. Firms can use the CFOs to help them craft unique experiences that are mutually beneficial for the firms and the clients.
Want to know how an outsourced CFO can help your business? Write to us at connect@finsmartaccounting.com for more.
Director Growth Strategy & Alliance
Maanoj Shah is a finance and outsourcing expert with strong Business Strategy and Scaling-up experience. Over the last 20 years, he has incubated multiple businesses and helped build global enterprises in verticals as diversified as hospitality, technology, and healthcare.
