Ralph Khoury > CFOs Must Step Up Stewardship Game

Seasoned international CFO Ralph Khoury says the scandals that have shaken Australia’s corporate landscape this year should be a wake-up call to all CFOs about their role as “stewards” of governance and ethics.

Deepening concerns about audit quality and risk management triggered by the latest rounds of auditing corporate scandals in Australia have firmed up Ralph Khoury’s belief that tough conversations are needed in the global CFO and audit communities around governance, compliance and ethics in the profession.

“Having always had the privilege of holding CFO roles in companies operating with the highest standards of governance and compliance, I’ve always had this basic principle that the CFO’s key role is as a steward, with a fiduciary duty to ensure that the company is being managed within certain standards that are impeccable,” says the Dubai-based CFO of Nissan United, a unit within global advertising firm TBWA.

But he says recent press coverage of failed audits in Australia and other markets indicates this principle may “sometimes be forgotten in today’s complex world”, a shortcoming he sees as a potential “sleeper” issue which could impact the reputation of the finance community in general.  

“If this ‘stewardship role’ is not elevated as a priority, CFOs run the risk of forgetting their underlying responsibility of providing the right protection for the company’s assets, whether they be tangible or intangible,” says the CPA Australia Fellow who has keenly observed and propagated the evolving remit of CFOs during more than 25 years as a finance professional across Australia, Asia, Europe and the Middle East.   

This can translate to CFOs dropping the ball particularly on non-financial risks in favour of financial risks, yet both need focus, he says. “We need to be aware of all matters that can potentially affect the financials and be involved in managing the risks, because if you’re only finding out about it once it becomes an outcome, it’s too late to manage it appropriately,” he says.

“Gone are the days when the finance role is purely transactional. The onus now is very much on the CFO to ensure the company has the appropriate governance framework, ethical standards, disclosure methodology and meets its compliance obligations. All of these sit comfortably within the CFO’s remit.”

Ralph Khoury, CFO

After beginning his finance career in Australia in the 1990s with Alcatel, from 1999 Khoury took on a variety of CFO roles in international markets, including with Alcatel-Lucent throughout Asia and Europe and, since 2008, in the United Arab Emirates leading finance teams for TBWA and Omnicom Media Group. In addition to his current role as CFO for Nissan United across the AMIEO region, he has responsibility for financial, legal, governance and risk management for TBWA Worldwide’s business in Saudi Arabia.

While he says many companies, such as his, do operate at the highest of standards – following the relevant listing and compliance requirements and having the right frameworks to support and enable the ‘steward’ – he calls out a combination of factors that may be creating challenges in pockets of the global CFO and audit community, including business being “much more complex today than it was 25 years ago”, along with the constant evolution of rules, regulation and the elevation of standards.  

“Finance professionals, CFOs and auditors alike, need to become constantly better at how they manage that growing complexity within their business environments,” he says.

“We are obliged to continue to upgrade our knowledge and skill sets and awareness of what’s going on. It’s not something that’s static. Whether it’s changes to tax legislation or accounting standards, or ESG reporting which is becoming very important, at the end of the day, consumers and investors want to know which companies are complying and which are not.”

Khoury’s advice to those looking for guidance on this matter is to elevate and adopt some clear principles so as to be “much more conscious on this topic, to help lift standards of finance teams and create a sustainable improvement in the finance function”.  

As a starting point, he is a strong supporter of continuous professional development, encouraging CFOs and auditors alike to tap into the ethics and governance courses, discussion groups and member events held by professional accounting bodies such as CPA Australia. In fact, CPA Australia recently introduced a mandated ethics component within the ongoing professional development commitment members are obliged to undertake.

He also suggests finance leaders reacquaint themselves with academic theories – such as the ‘stewardship theory’ put forward by Lex Donaldson and James Davis in 1991, and ‘agency theory’ by Michael Jensen and William Meckling in 1976 – concepts he says “may have been forgotten but remain highly relevant to governance and compliance in today’s world”.

Importantly, he urges CFOs to nurture a ‘governance stewardship mindset’ across the whole finance team.

“As CFO, you cannot be across every detail of every transaction, every journal entry, every document that’s signed or commitment that’s given – you need confidence that all team members are aware, fluent and trained in these sorts of matters,” Khoury says.

“All team members must have the knowledge, understanding and sense of awareness to ensure the right governance and compliance is in place and being followed. Indeed, the finance function is uniquely positioned to take a leading role in entrenching this mindset organisation-wide.” 

This includes embracing their “right to say ‘No’, and to disagree if they see fit”, he adds. “The question that you should always be asking is, ‘What is the right thing for the company?’”

To stay tapped into emerging governance and compliance issues, Khoury recommends building up and connecting into a network of industry peers and professional finance bodies, as well as staying across relevant issues in the media. “When you discover best practices, use them as an opportunity to up your game, to enhance further your control environment or governance programs,” he says.

“Within your industry and ecosystem – your suppliers, your partners your clients – they’re all looking to improve their governance frameworks. Have conversations with them about it, because if enough people start talking and sharing experiences, ideas and best practices, we can indeed elevate the entire profession.” 

While he has no doubt rules, regulations and standards will continue to evolve with an aim of lifting companies’ governance and ethical standards – as they have since the spectacular collapse of energy-trading company Enron in 2001 triggered the introduction of the Sarbanes-Oxley Act – Khoury says the finance profession is the key to keeping it all in check.

“Today, what you see, perhaps is not another big Enron on the cards, but potentially a lot of mini Enrons,” he says.

“To prevent this, the reform needs to come from within the profession.”