'Silos' ticking time bomb for businesses

A 'siloed approach' to financial risk management is putting many businesses at risk. Photo / Steven McNicholl

Businesses need to be more aware of the specific risks their different departments bring to an organisation, a financial risk advisory firm says.

Bancorp Treasury Services senior client adviser Peter Cavanaugh says a "siloed approach to financial risk management is putting many businesses at risk".

Cavanaugh said too many New Zealand businesses were creating a "ticking time bomb" by failing to encourage all parts of the organisation to take ownership of financial risks.

He added businesses needed to adopt a holistic approach and actively take responsibility for identifying, assessing, managing and reporting risk.

"This is particularly true of 'risk creators' such as salespeople, marketers and buyers, whose roles are all directly involved in profit generation, and whose decisions and actions have a direct impact on the bottom line."

Cavanaugh says that often the external and internal sectors of a business have little interaction with the finance team beyond routine reporting, and this needs to change.

"Silos can be suicidal for a business and a prevailing 'not my problem' attitude to financial risk can become everybody's problem."

He said an example of poor communication between sectors was products that were sold under market value because the exchange rate had not been correctly calculated.

Cavanaugh said these silos could be broken down by allowing free, open and honest communication to flow from board level through to the risk creators. "The result will be quicker, more accurate and more meaningful data flowing between all parties."