Organizations can’t afford to look at risk and financial operations as departmentalized units. Financial management and governance, risk, and compliance (GRC) functions must adhere to a unified model that enables the entire company to move cohesively in the face of change and uncertainty.
The modern CFO’s role has now expanded to contribute to risk management strategy. With myriad changes in the compliance and operational management environment, the CFO and financial managers must understand how far the scope of interconnectedness goes. Pull a thread here, and you’ll find it’s attached to the rest of the world.
Let’s take a look at some key categories that impact organizational risk exposure and fall under the supervision of financial officers and controllers:
CFOs must set policy and strategy to guide committees, financial reporting, accounting, and contracts, designing a system of controls and organizational processes.
Compliance is basic hygiene in today’s risk and regulatory landscape. Compliance risk management goes beyond correct reporting procedures; it also means understanding your product liabilities, personnel liabilities, and cybersecurity vulnerabilities. A CFO not being obsessive about compliance can result in lawsuits, regulatory action, and reputational damage.
( Chart your path to GRC maturity and risk integration with our Compliance Risk Toolkit > )
You might think of your organization as a single entity, but in reality, it’s part of a collective that includes the third and fourth parties that contribute to core operations. Vetting and monitoring your vendors, contractors, and other third parties and their solutions can prevent multi-million-dollar mistakes. While organizations like Experian might walk off easily with a lawsuit in the wake of a data breach, in Europe, the same operational neglect could result in both a lawsuit and a nine-figure fine. As we approach this level of enforcement becoming the new normal across the Western world, the buck stops with the CFO.
The price of managing financial risk goes beyond underinvestment, reporting, and compliance. Capital risk becomes a broad function of the CFO. The perils of bad debt management, overinvestment, and hiring the wrong advisors to help with critical decisions can also be fatal to the organization. Capital risk also encompasses economic and geopolitical awareness — knowing the landscape and how to keep the organization agile and operationally resilient through uncertainty.
All of these areas require CFOs to be proactive and establish processes and communication systems that support increased risk awareness and transparency.