:: ICMA – CMA – Certified Management Accountants ::

In keeping with the strategic positioning of the ICMA as an institute for Chief Financial Officers, the official magazine of the Institute becomes the Australian CFO magazine. The research undertaken by the Institute indicated that the previous ‘Strategic Finance’ journal was too USA focused and did not tackle issues relevant to the Asia-pacific region.

The Chief Financial Officer (CFO) of a company is the corporate officer primarily responsible for managing the financial risks of a business. This executive is also responsible for financial planning and record-keeping. In recent years, however, the role has expanded to encompass communicating financial performance and forecasts to the analyst community. The title is equivalent to finance director, commonly seen in Australia and Asia. The CFO typically reports to the Chief Executive Officer, and is frequently a member of the board of directors.

Although a large percentage of CFOs hold accounting qualifications such as the CMA, many CFOs still have no qualified management accountancy qualification that can direct the strategic direction of the company. This has been criticised in some quarters as a contributory factor to the wave of accounting scandals seen around the world in recent years. Subsequent legislation such as the Sarbanes-Oxley Act of 2002 aims to address this by requiring at least one member of the company's Audit Committee to hold an accounting or finance qualification. The act makes it more likely, therefore, that the business world will see a trend towards Chief Financial Officers possessing a accountancy qualification such as the CMA.

If the role of CFO is compared with that of CEO, i.e. as strategic business partner and with obligation of statutory duties under the relevant Statutory Acts, both can be seen as distinct and equal-ranking top executive posts. As such the Institute has also formed an alliance with the CEO Institute, for members to have access to its significant resources. See www.cmawebline.org

Snapshots” Series……

On Target continues its series of Snapshots on a particular theme over many issues.

Most companies involved in ERM appoint "risk owners." These are the people in a corporation who are responsible and accountable for managing specific risks, such as the chief legal officer, who is responsible for a company's legal risk. Other risk owners are the internal and external auditors. Some companies have benefited greatly by having a Chief Risk Officer (CRO) as the company's primary risk owner who oversees and coordinates the entire ERM process. Other companies have formed one or more risk management committees or groups to oversee risk management activities.

Although there is a view that only senior management and risk owners should be directly responsible for risk management, we argue in this paper that the management accountant can act as an integrative catalyst in the communication amongst risk owners. We further argue that the management accountant is the ideal candidate to fulfill the role of the Chief Risk Officer or at a minimum provide the communication links for the CRO to perform his/her duties.

Management Accountants are the information providers to management. The management accountant plays an important role in corporate governance. Often such professional are, or are closely aligned to the Chief Financial Officer (CFO) who serves on their company's board of directors is perfectly positioned to facilitate the two-way communication that must occur between the board and the entire management team for effective governance to occur. Traditionally, the management accountant performed this integrative communication role when undertaking the budgeting process. These same information collection, analysis and dissemination processes can contribute to effective ERM and governance by directing and overseeing the ERM process on a day-to-day basis and monitoring a company's risk management decisions and activities.

Although the board of directors should not assume direct responsibility for risk management, its governance activities contribute significantly to effective ERM, and boards must actively participate in risk management to add value. The board should involve itself in the ERM process by providing direction, authority, and oversight to management through the CRO. The board should hold the CRO accountable for keeping it apprised of significant risks, taking appropriate actions to manage these risks, and reporting risk management performance results. Thus the CRO needs to be a person who is multi-skilled, and can:

· Oversee the implementation of the company's risk management process, and monitor the process to ensure that it continuously operates effectively in the best interests of the company's stakeholders;

· Contribute expertise, judgment, and professional skepticism to the strategic planning process;

· Ensure that management's mix of performance indicators associated with key risks is aligned properly with the company's strategy and linked appropriately to shareholder value.

· Define and communicate risk tolerance thresholds to senior management to guide management's decisions; and

· Assign authority to senior management to manage risks within the specified tolerance levels.

Post implementation, the board should evaluate senior executives' performance in terms of ERM, and ensure that their performance targets and compensation are aligned with the company's strategy and linked to shareholder value. It also should evaluate senior management's succession planning process to ensure that appropriately qualified people are ready to step in and carry on corporate executive duties when members of the senior management team turn over.

	RISK MANAGEMENT RESPONSIBILITIES?	PRIMARY ROLES IN CORPORATE GOVERNANCE
*Board of Directors*	No	Provides risk management direction, authority, and oversight to senior management.
*Senior Management*	Yes	Has primary responsibility for ERM. Delegates risk management authority, and specifies risk tolerance thresholds to risk owners. Reports ERM plans and performance results to the board of directors.
*CRO/ Management accountants*	Yes	Assign specific risk management authority and risk tolerance thresholds other personnel. Report ERM plans and performance results to senior to management.
*Internal and External Auditors*	No	Provide independent, objective assurance to senior management and the board of directors about the effectiveness of risk management, control, and governance processes.

Can enterprise risk management (ERM) be integrated effectively with corporate governance? The answer must be in the affirmative as many of the ERM and governance framework responsibilities, overlap, and one process affects the other. However, we will argue that integration is only possible via effective co-ordination and communication.

Directors, senior management, risk owners, internal auditors, and external auditors should know that ERM and governance processes must evolve continuously. Everyone involved has important ERM and governance roles to play as they endeavor to more closely align their companies' governance with their ERM processes.

It’s the time of year when many of us will have been through a performance review. While we all have different expectations and experiences of our boss, a recent survey reported in HR Magazine for November 2006 (“To See Ourselves As Others See Us”, p.16) found that while 92% of bosses say they are an excellent boss, only 62% of their direct subordinates gave their managers a good rating and 10% said their boss does a poor job. The report also says that only 26% of employees have an opportunity to formally review their manager’s performance.

Leadership is the theme of three articles in the Harvard Business Review for January, 2007. For management accountants, Franz Humer of Roche writes in “Intuition” (p. 17) that leaders must make decisions on how much to trust information and need to be switched on to ‘receiving’. In the other articles, Olli-Pekka Kallasvuo of Nokia writes on “Humility” (p. 16), and Ibarra and Hunter write on “How Leaders Create and Use Networks” (p. 40).

In the first issue of Volume 7 (2006) of Journal of Intellectual Capital, S. Voelpel et al. write about “several deficiencies” in the Balanced Scorecard (“The tyranny of the Balanced Scorecard in the innovation economy”, pp. 43-60). A response from Robert Kaplan and David Norton is found in issue no. 3 (pp.421-428) where they counter five of the alleged problems. For example, Kaplan and Norton refute problem number five which argued that “the BSC is grounded in a mechanistic mindset (and) linear thinking” by noting that their earlier articles had highlighted the importance of using the BSC dynamically and strategically. Perhaps those who have adopted the BSC are too quick to see a simple solution to managing performance and unable to think more broadly and strategically (but given that 92% of managers believe they manage well, am I going to tell them or are you?).

CMA Philippines seminars on Advanced Management Accounting and Advanced Strategic Management Accounting (Batch 9) conducted by Business Sense for ICMA.

Advanced Management Accounting and Advanced Strategic Management Accounting symposium conducted by the IPMI Graduate School of Management for ICMA.

Advanced Management Accounting and Advanced Strategic Management Accounting symposium conducted by the International Academic and Professional Development Centre.

8th CMA Symposium on Advanced Management Accounting and Advanced Strategic Management Accounting conducted by First Canvas and D'Souza Financial Services, for CMAINDIA.