There’s an eyebrow-raising C-suite title showing up in the news lately, and when they do, oh boy, it is usually a sign that there is trouble brewing in the boardroom. CROs, or chief restructuring officers—not to be confused with the other CROs, the chief revenue officer or chief risk officer—have been brought on to tackle some of the biggest business implosions in recent months.

Numerous companies have tapped these interim executives including defunct startup lender Silicon Valley Bank, psychedelic startup Field Trip Health, and infrastructure services provider QualTek—to oversee operational and financial restructuring.

But what is a chief restructuring officer, and what do they do?

Quick…get me a CRO! There are a variety of reasons for a company to bring in a CRO. They are usually facing financial troubles, such as decreased financial performance, shrinking cash reserves, a decline on a new round of credit from a frequent lender, or most commonly, lack of trust in management of a company’s CFO, CEO, or COO, Luke Stephenson, associate director at management consultancy MorrisAnderson, which offers fractional CRO services, told CFO Brew.

“[These companies] need someone right here and now that can take charge, handle the situation, stabilize things and, of course in the background, you’re looking to go find someone that can come backfill that need,” Stephenson said.

Deciding to hire a CRO usually is prompted by a company’s stakeholders, namely lenders or attorneys, rather than the company’s executives, according to Stephenson.

Continue reading.—LR

Auditors from KPMG LLP didn’t flag the significant material risks that took down Silicon Valley Bank just two weeks before the bank’s collapse, according to a new report in the Wall Street Journal.

While KPMG did find that potential losses from loans were a “critical audit matter”—information that has significant impact on the financial statements—the firm’s auditor did not identify the unrealized bond losses as such.

“The auditors failed to mention the fire in the basement or the box of dynamite on the first floor, but they did point out the peeling paint on the flower box,” Erik Gordon, a University of Michigan business professor, told the WSJ. “How could they miss the interest-rate risk?”

Auditors have been required to include critical audit matters in their audits since 2017. The WSJ found that critical audit matters have not flagged the issues that led to “a collapse of confidence among depositors and investors” in banks across the country.

However, Dennis McGowan, vice president of professional practice at the Center for Audit Quality, told the WSJ that auditors can’t predict every scenario that would make an issue a critical audit matter.

Auditors are under increasing pressure to improve the quality of their audits. In December 2022, the Public Company Accounting and Oversight Board (PCAOB) issued a report that found “a collective increase in the number of audits with deficiencies” including, among other things, leaving out critical audit matters.

The PCAOB recommended that audit firms bring in outside experts to help identify critical audit matters, expand the use of audit technology, and build communication tracking systems to improve the quality of audits.—DA

Sometimes a party gets too big, and it’s tough to figure out where everybody came from, especially that dude who showed up with your friend and still hasn’t taken his shoes off.

Companies, too, have their own gathering of suppliers, vendors, and partners. And some will spill (metaphorical) salsa all over your (proverbial) couch.

A report from the risk-management firm Cyentia Institute and cybersecurity rating company SecurityScorecard found that 98% of surveyed organizations have relationships with at least one vendor who suffered a breach in the last two years.

The 230,000-plus organizations had an average of about 10 third-party partners. The information services sector had the highest number of connections: 25.

When there’s too much third-partying, some risk-specific steps can help organizations make a giant contractor web feel smaller and easier to manage. One helpful measure: defining business priorities, which have a way of revealing “must avoid” outcomes.

“Growth targets, new markets that you’re entering, new products that you’re launching, your corporate objectives, goals, initiatives, and projects. The mirror of those is all the things that can’t go wrong,” said Chris Matlock, VP, advisor, and research leader for risk and corporate strategy at the market-intelligence firm Gartner.

Companies have experienced so many third-party risk events that the concerns have reached the board level, said John Wheeler, senior advisor at the risk-management platform AuditBoard.

“A lot of companies, in my estimation, have gone to market with new digital products and services to deliver things in newer and safer ways as a result of the pandemic. But in their haste, they really haven’t identified and managed the risk as they should,” Wheeler told IT Brew.

Continue reading on IT Brew.—BH

Today’s top finance reads.

Stat: 18.7%. That’s how much traffic to Twitter’s ad portal fell year over year, but for the life of us, we can’t think of any reason why this might be happening. (Similarweb)

Quote: “The financial challenges that a number of countries have experienced are casting a shadow on our outlook. We are seeing a lot of downside risks going forward.”—Pierre-Olivier Gourinchas, the IMF’s research director, in talking about global risk and growth projections. (the Wall Street Journal)

Read: Convincing people to come back to the office is proving to be an intricate dance. (the New York Times)

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