In a dynamic environment of disruption, the role of the financial executive or chief financial officer (CFO) in managing an enterprise’s risk and creating corporate value is expanding. Successful financial executives today must possess key strategic skills to optimize their enterprise’s business model and market value.
To describe the strategies CFOs use to manage risk and create value, and to determine how CFOs should incorporate the strategic themes emphasized in the upcoming COSO enterprise risk management (ERM) framework, the Financial Executive Research Foundation (FERF) has released “The Strategic Financial Executive: Managing Risk In A Disruptive World.”
FERF’s research examines steps financial executives can implement to manage risk and add value to their organizations, particularly in the following areas:
• Recognizing disruption, the speed of change, and the underlying sources of disruption
• Increasing the enterprise’s risk IQ and capabilities
• Thinking and communicating strategically
• Developing skills to enable a forward-thinking, strategic finance organization.
Risk Expanding
It is not just the rising level of risk that is troublesome; it is also how fast things are changing. The pace of change itself is causing disruption, such as decreasing the amount of time in which companies may identify change, interpret it, and pivot their organizations in the right direction.
Similarly, a rapidly changing business world means the role and skill set of the financial executive must be amenable to adapt swiftly. Many financial executives respond not only to change, but also to the demands these changes create for more comprehensive information, better understanding of risks, deeper market knowledge, and, especially, a new skill set.
Being on the leading edge requires more than a mindset and risk-taking culture — it also demands that companies manage the risks that arise as innovation occurs and address risks and dimensions others may not have considered. Additionally, financial executives must recognize that every risk cannot be seen in advance, so they should create capabilities to address emerging exposures.