Addressing risk on the board
focus Managing risk: Central to good banking political risk:
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on the horizon Environmental risk: crisis into opportunity
international risk: get the global strategy right soft risk: how culture can fail business
Nick Araco, Jr
President & CEO, The CFO Alliance
risk pendulum is swinging back addressing risk on the board
There is no question that the role of the chief financial officer (CFO) has always been demanding. However, given rapid developments in technology, regulation and the entry of new players in the marketplaces in which they compete, the success of the CFO depends on his or her ability to deliver on a broad agenda by establishing strong relationships, internally, across the enterprise, as well as with the most critical external stakeholders they have: their customers. The swift development and ease of access to new technologies surrounding the customer experience creates opportunities and issues for the CFO. In the face of ever-growing transaction volumes, and with access to an unlimited quantity of data on the “who/what/when/why/where/ how” they are interacting and doing business with their customers, many CFOs are using fresh technologies to deliver the business intelligence, process efficiency, and compliance and control requirements that support their customer experiences. During my travels to the US to meet 400 CFOs, 90% agreed that these technological advances provide them with “more information in less time”. But 60% of these same CFOs felt they were feeling “spread too thinly” and 50% were paralyzed by the speed and quantity of data they now had at their fingertips. I probed a bit deeper to identify the root cause and, with their help, determined that often it was because the relationship between CFOs and their chief marketing officers (CMO) was not functioning like a partnership. By talking to other CFOs, we determined that the strongest
Dialogue | Sep/Nov 2014
partnerships developed when: (1) both individuals were focused on the numbers that matter; and (2) both tried to balance short- and long-term opportunities and risks. A number of CFOs agreed to help their CMOs identify and measure the numbers that were most aligned with profitability and most impactful to determining shareholder value – return on investment, net present value and operating margins.
Enhancing collaboration In return, CFOs agreed that if they would work to enhance their collaboration with their CMOs, they could enhance their understanding and confidence in the non-financial metrics that drive their businesses. For example, the CFO WATCH THE VIDEO of a consumer products company said that, by DOWNLOAD THE working together, they were able to develop VIDEO HERE a set of non-financial metrics that helped them better identify opportunities and manage a variety of business risks. These non-financial metrics included the number of people visiting and interacting with their blog, website and social media platforms, as well as the long-term indicators of the “health” of their brand. This approach to marketing may not mean the end of difficult budgeting, forecasting and performancebased conversations between the CMO and CFO. But the emergence of this technology and data-driven environment provides them both with a common ground on which to synchronize their understandings and perspectives, and achieve a better understanding of each other’s roles in driving real business value.
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