Contribution of a CFO towards Operations and Risk Management
The key of any business management is to scale up its business on an upward trend and a Chief Financial Officer (CFO) is the one of the ofthe crucial resource who works on ensuring that the business scales higher under the leadership of the CEO.
The CFO supports the CEO thoroughly by providing a sound advice on the day to day functioning of an organization hereby ensuring the company’s stable performance and a year on year growth of the same. With business environment changing, they assumed the role of CFO and the role is continuously evolving.
1. CFOS TACKLING RISK DATA: DEFINING PRIORITIES:
One of the prime most important risk-related priorities for a CFO is data-related.
How much financial institutions will be at dealing with risk sis directly proportionate to the changes that have been carried out in the past, and what are the changes being carried out now.
A journey to more comprehensive risk management undertaken by the financial sector has begun,but it is still at a nascent stage. The majority of effort in the recent years has been concentrated into getting the necessary data to make strategic predetermined choices.
ACFO’stasks is leading an element in improving risk management: they consist of integration of data across the organization (cited by 46%), and improving the management of data relevant to risk (40%) are two of the three leading riskrelatedpriorities for the finance function; the other top priority is improving risk management processes(54%).
A basic necessity for good risk management has always been a challenge. Incorporating risk-based information into financial and performance management has always been an obstacle that is technical.Poorly integrated systems (cited by 41% of survey respondents), and inconsistent metrics within companies (37%) are the causes.
28% of respondents do not believe their companies have the capacity to share relevant risk data because of information silos, and 21% think that the risk function does not provide necessary data within the organization.Data issues,for the finance function,are equally risky ones.So,the improvement of risk-related data is an obvious focus in the broader transformation of the department.
CFOs have been tackling the challenge actively.In the last two years, out of the 97% of surveyed companies, at least one board committee or C-level executive has requested new or enhanced risk data from the finance function. The consideration given to data and analytics has increased significantly and even more so on the investment banking side.
2. BUSINESS STRATEGY CONTRIBUTIONS TO OPERATIONS BY A CFO:
A crucial factor for having a long-term winning business strategy is the ability to continuously evaluate the company’s pros and cons. Here, by nature, a CFO should possess the capability to get particular number-based outcomes from most of the operational scenarios.
A CFO should have an insight of the following:
An in-depth understanding of a business from the commercial standpoint.
Flexible attitude towards business processes.
Expertise to offer relevant financial insight on business decisions.
Possess an ability to lay out the route map for success, accompanied with potential correction action measures.
So, how does a CFO contribute to the operations? The following are some of the contributions:
3. STRUCTURE DEVELOPMENT:
As per the hierarchy, after the stakeholders, it is the CFO who shoulders and has the most sensitive information about the business. Using this information, a CFO is able to formulate a strategy to run the business smoothly.
4. REAL-TIME EXECUTION:
No amount of strategizing and planning is useful unless it is not implemented.A CFO ensures that the execution of the overall strategy, without interfering withthe operations side.
5. ASSESSMENT AND REPORTING:
A CFO will act as the comprehensive source of all information related to strategy and should present all the facts to its board members. The CFO primaryconcern should be with the numbers.
A Chief Financial Officer’s rigorous assessment by comparing the actual performance against the estimated/envisagedtargets gives a clear picture of what was promised and what has been delivered.
A strategy once formulated at the startdoes not mean it will be followed, irrespective of the business circumstances or expansion requirements that a firm may face in the long run. Different strategiesneed to introduce or restructured based on different scenarios, and a CFO job will be ensuring all these are taken care of.
7. M&A TRANSACTIONS:
Foreseeingany Merger and Acquisition deals for abusinesscan be quite daunting.The job of a CFO should be to take everyone into confidence and be able to handle such M&As with ease right from the involvement in the strategic thinking for that deal, to validating the deal’s key drivers and structuring the deal and finally conducting due diligence and getting all necessary approvals.
9. OUTSOURCING A CFO TO STRATEGIZE YOUR BUSINESS:
CFOs have constantly been the guardians of good business processes and practices, effective controls and risk mitigation tools, treasury, financial analytics etc. This guardianship has indeed propelled CFOs to be ‘agents of change’ by creating shrewd work patterns with insights that drive performance at a higher rate hereby providing better results.
At ProBizAdvisor, we specialize in offering outsourced CFO services to a wide variety of clientele, for a number of reasons including contribution to Business Strategic leadership. At ProBizAdvisor, our CFOs have not assessed growth in terms of business profitability and financial metrics alone but have consistently strived to give a genuine contribution towards strategic initiatives that are taken up by an organization
Hope the above information about the contribution of CFO to your business team leadership along with an outsourced CFO’s performance assessment parameters; help you to get the maximum out of your outsourced CFO professional.