Revisit risks when restarting digital finance transformations

20 May 2021 5 min. read

Many digital transformation projects in the finance function had an enforced hiatus as a result of the pandemic, but as we now return to normality, these projects are being picked back up. Ray Welsh, Head of Product Marketing at FISCAL Technologies, explains why finance leaders should revisit their risk assessment for optimal results.

While the pandemic saw some tactical elements within the finance team accelerated, overall digital transformation projects were halted as more pressing issues came to light. For example, many organisations have been moving to e-invoicing in recognition of the millions of pounds this can save them, and many organisations are executing ERP upgrades and migrations to become cloud-based. 

But there is now extra risk of input errors present as a result of the shift to home working, and organisations must ensure they have a ‘safety net’ in place while executing these transformation projects to protect against this – and many other new risks bought about by digital transformation. 

Revisit risks when restarting digital finance transformations

Digital finance transformation projects are similar to open heart surgery in that it’s imperative that while projects are being executed, everything is still running as normal in the background and that every precaution has been taken to prevent unwelcome interruptions. 

Resilience, adaptability, agility and protection

Most finance teams will already have resilience, adaptability and agility on their priority list for the next few years. But the missing piece here is protection. As you restart your digital transformation projects you should be thinking about how you can build protection from the outset, rather than it being an afterthought. Change always introduces new risks so it’s imperative that you plan in greater protection. 

Through our own research at FISCAL Technologies, we discovered that finance teams have witnessed a 6% increase in input errors during invoice processing and a slower rate in the reduction of other processing errors over the past 12 months. Additionally, the number of risks detected rose year on year by 20% on average, with the highest rise being 37% in manufacturing. 

In terms of risk value detected and prevented, the average increase across all sectors was 70% – a total of £240 million in a twelve months period. This clearly shows how the pandemic has caused an increase in risks within the finance department. Stepping-up protection is therefore key.

Example transformation project

If we look at a specific example of a transformation project with regards to accounts payable, these might commonly be upgrading, migrating, or moving ERP into a cloud-based solution. It may be robotic process automation or some form of artificial intelligence being implemented. Consolidating operations into a shared service centre is a common transformation project. The list goes on and there are so many different possibilities for finance transformation projects

Because these are by definition new systems and processes, they will present new risks. Existing controls are based on existing systems, processes and known risks. It is normal for a risk assessment to be carried out when a new system is put in place, but this will only pick up visible, known, and the more obvious risks. 

Risks that have not been seen before are unlikely to show up in a risk assessment so you need to ensure you have protection in place to detect the symptoms of unchecked exceptions and anomalies occurring, not just the known causes, in order to effectively safeguard your working capital and reputation. 

The risks to beware of

So, what could some of these new and heightened risks be? Well this of course depends on the transformation project you’re undertaking, but these can include supplier invoices being duplicated or containing incorrect amounts – there will be new ways that invoices can be received and contain errors.

This could be incorrect bank details resulting from either internal and external fraud, non-compliance with external regulations or non-compliance with internal best practices such as segregation of duties. Additionally, there could be increased risk of unnecessarily high processing time and costs, unused credit notes, or P-card and AP invoice duplication.

Minimising the risk

In order to protect yourself from these risks, you should employ a solution that is not specific to any system or process, which checks for errors and exceptions, whatever their origin. This provides you with your safety net to detect risks through comparison of current to historical transactions and trends. 

For example, moving to a cloud-based accounting or ERP system will cut costs and support resilience with flexible, remote working. Existing controls were put in place around centralised, office-based AP invoice processing but moving to a cloud-based ERP system with a remote workforce makes these controls largely obsolete. 

Through a robust forensics and AI-powered analytic solution, any risks that are not detected by existing controls, or by the new controls put in place when the cloud-based ERP goes live, will be detected and shown to the finance team, along with the supporting information. 

Ultimately, before digital transformation projects take place, or any kind of ERP migration happens, finance teams must take a proactive approach in order to mitigate the known and unknown risks if they are to fully succeed in their digital transformation projects.