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Understanding Your Risk Profile

on August 30, 2021

Benchmarking your risk and capacity to address it are critical first steps in tackling cost control. Over the past 12 months, we have seen a dramatic rise in problem transactions (44% of Accounts Payable have been identified as problematic). Since 2019, cash leakage has risen over $8 Million which causes the cost of recovery to increase. 

A 2021 study commissioned by Oversight and conducted by Forrester revealed that most firms (85%) with a spend optimization solution have a single view of spend, compared to only 9% of those without one.

For those lacking this comprehensive view of total company spend, most spend analytics work is still done retroactively across siloed departments and systems using manual processes. Notably, while organizations with a spend optimization solution report fewer challenges and better financial controls, only 25% of respondents have adopted such a solution.

The Risk Assessment

We developed a Risk Assessment tool to help finance and risk leaders understand where their organization falls in the spectrum of spend risk and financial analytics.

When it comes to risky spend and how your organization mitigates it, there are two factors to consider: your degree of risk exposure (from low to high) and the tools in place to disarm risky behaviors and patterns (from low maturity to high maturity). These contribute to a company’s risk profile, as defined by Oversight: 

The Predictive Risk Profile

We characterize these organizations by their forward-looking approach to spend control, even in the face of seemingly lower than average risk. The predictive organization deploys the leading tools in the industry to combat fraud, waste and misuse. Predictive organizations should continue to focus on monitoring risk exposure when fraud is on the rise.

The Proactive Risk Profile

We define proactive organizations by their high-risk exposure and high solutions maturity. From multiple ERP systems that don’t “talk to each other” to inconsistent invoicing rules, the proactive organization recognizes that it has room to grow operationally and deploys the tools to combat spend risk wherever it may reside.

Reactive Risk Profile

Reactive organizations have low solutions maturity, deployed in a low-risk environment. They are less inclined to invest in spend control capabilities as they assume that their current spend control/audit system is sufficient. They should evaluate and futureproof their spend control capabilities to prepare for any changes to their risk exposure.

The Firefighter Risk Profile

Firefighters combine high-risk exposure with low spend control capabilities. These organizations are not equipped with the capabilities to mitigate risk exposure effectively. They should review their current spend control/audit systems and act immediately to manage their risk.

Now more than ever, businesses should deploy tools that adapt. For many years, risk profiles changed slowly, and businesses assessed conditions as predictable. But the pandemic gave rise to new vectors and an explosion of fraud:

79% of companies reported a rise in fraud cases in 2020

90% expect further increases in 2021

44% rise in problem transactions

Where does your organization fall on the spectrum of risk and readiness? Find out today in just two minutes with Oversight’s Risk Assessment tool.

Meg Howe

Regional Vice President of Sales, West