Companies that do not ramp up their risk and control frameworks to match the surge in business from an improving economy could suffer major financial losses, says Cathy Blunt, vice president of the Institute of Internal Auditors (IIA).
“Down-sizing and cost-cutting during the economic slump has left holes in the risk management structures of many Australian companies that could leave them exposed as business activity picks up,” she said.
According to Blunt, signs the economy is coming out of the recent slump should warn companies to plug the gaps left by the downturn and sharpen their focus on new and emerging risks arising from business growth.
“The internal audit function which is responsible for facilitating a company’s response to business risks may have been scaled back. Staff exercising basic functions such as account reconciliations or payment authorisations may also have been retrenched causing chinks in financial controls,” she suggests.
Blunt added that while brighter economic times are on the horizon, companies need to strengthen their risk management to avoid potholes along the way.