The role of CFO in strategic risk management

Strengthening CFO's role in strategic risk management in capital intensive market volatility

Capital intensive businesses

Capital intensive business has a lower margin. Leadership always expects return on return on capital (ROCE) over capital cost. The most important businesses are oil and gas, infrastructure, construction, information technology, etc.

Challenges of Market Volatility

Continuous pressures on market volatility, margins and demanding stakeholders increase the growing difficulties in an increasingly interdependent, interdependent and unpredictable world economy.

Many organizations still have to adapt to this new economic situation. There is no need for action any more – you have to set it up and act now.

Many organizations are transforming their business to consolidate their organization to reduce costs, increase customer focus, restore trust and / or embed business to new business

For many organizations, long-term success depends on the success of conversion programs. To make it even more challenging, the margin of error is still small, and the environment in which the transformation must take place continues to grow in complexity.

Strategic Risk Management

• This is a process for identifying, assessing and managing both internal and external events and risks that may hinder the achievement of strategy and strategic goals

• The ultimate goal of shareholder and stakeholder Creating and Protecting the Value of Entities

• This is a primary component of the entity's general business and the necessary basis for a risk management process

• The Business Risk Management (ERM) component, which is predominantly implemented by the board of directors, management and others. external and internal events or scenarios affect the organization's ability to achieve its goals

• This is a continuous process of implementing strategies and strategic management

Identifying CFOs' concrete steps to increase risk management participation in investment decisions [19659002] Concrete steps to increase CFO participation in risk management

• Create a close link between risk management and other business processes

• Corporate level discussion on risk preferences focusing on risk choice and selecting the optimal mix

• Use Risk Analysis for Communicating Investment and Strategic Decisions

Risk Management and Other Business Processes

• Future Future Future Questions to be Presented specify

• Based on the priorities, guidelines should be issued that refer to business performance indicators [19659002] • Entrepreneurs plan ad hoc analysis of upside and risks and most, if not all, focus on another "Center Cut" arios [19659002] • Point out where and what risks affect your business plan

• Systematic stress testing using macroeconomic scenarios that reflects potential impacts on financial engineering

• Probable "financial risk" investment decisions for these efforts . (Cash and Cash Demands)

Corporate Level Discussion on Risk Preferences, Risk Management and Selection of the Optimal Mix

• Before deciding, a clear answer must be given to the following questions: [19659002] o What is the company's competence on the market ?

o Does decision-makers know the risks involved, including the risk of tail, and understand their potential impact?

o Is the company able to survive extreme events? • Risk appetite articulates the risk level that the company is willing to accept to achieve strategic goals

• Risk appetite framework helps management understand a company's risk profile, balance balance between risk and return, and nourish healthy risk culture in the body.

• Qualitative measures identify key business strategies and business goals that determine the direction of the business and present the benefits.

• Quantitative Measures Offer Specific Risk Levels

Use Risk Analysis for Communicating Investment and Strategic Decisions

• The CFO plays an important role in financial and strategic aspects of investment and in evaluating significant decisions. It leads the debate and rival proposals and solutions and often has strong decision-making rights.

• The Quality List of Major Risks has been discussed and decided on major major projects that are comparable to the stock market value. The CFO provides the appropriate series of core financial and risk analysis elements to run each option in order for this value to appear and be discussed .


Best Practices for Financial Health of the Company

The CFO has several opportunities to compete more effectively in Risk Management Decisions. Improving the return will begin to rethink where to play – and four strategic steps that many companies often ignore to improve performance.

Where To Play: A Profit-Oriented Portfolio

• The most important issue for management teams in capital-intensive industries is to stay in businesses where margins are constantly stopped. Many companies have decided to quit low-profitable businesses, which were once considered basic. By re-balancing their portfolios, they shift to the value-added chain and invest in related industries where new technologies provide competitive advantages.

• Mapping profit groups is an important tool for assessing whether or not there is a business sense. In heavy industries, management teams are often so concentrated on quantities and tonnage to ignore the largest profitable pools. Knowing resources and distributing profits across the industry companies have a role in improving internal earnings.

• The premium end of the business generally accounts for a very large part of the profit base. Corporations competing in capital intensive industries often have the best opportunities there.

• Choosing the right place in the value chain is also crucial to improving returns and the most lucrative venue varies between industries

Best Practices Applied to Financial Health for Your Business How to Get There: Four Strategic Steps to Improve Returns [19659002] first Improve the cost base and continually review risks –

• In capital intensive industries where low yields are increasingly endemic, reducing costs and improving capex efficiency is an important way to improve performance – New-market players in capital intensive industries have a strong competitive advantage it is relatively low. On the other hand, focusing on reducing costs to many leading players means that they sometimes lose the capex. One way of balancing: a more disciplined approach to armaments management towards capital oversight and a comparison of company performance with industry leaders

• Cost discipline makes a critical difference. One-off efforts generally do not result in savings as shown by our research. One explanation is that, in difficult cases, management teams quickly reduce costs, but when the cycle rises, they tend to focus on cost increases and focus on growth-related priorities.

• A rigorous approach to costing the development and nurturing of adequate skills to optimize working capital can help capital-intensive companies.

2nd Creating the Lowest Cost

• Geography is another key factor in improving the return. Investing in geographies offering the lowest landing costs can create a strong competitive advantage. This is especially important in a tool-heavy industry where the cost of closing and moving businesses is high.

• The best performing companies regularly review their geographic area, as cost dynamics are constantly evolving. you can choose the cheapest geographic competition at the beginning. Those in mature industries need to consider short-term disadvantages over the long-term benefits of reducing complexity

. Strategic Utilization of Mergers and Acquisitions • Smart Acquisitions can dramatically improve performance, but many companies go bad if they invest at the highest peak at the highest peak simply because cash is available. Leadership teams that use a strategic, disciplined and long-term approach to M & A instead of a tactical and episodic approach can improve their return.

• Companies that raise M & A as a core competency have the highest value for them. Leaders spend time preparing a structured schedule for the most attractive potential targets, making it easier to acquire assets when it comes to the right opportunity and targeting acquisitions at the bottom of the cycle

• The most experienced companies in M ​​& A build their capabilities over time. They are looking hard for mergers or acquisitions, which increase their operating profits and fuel-balanced growth. They follow almost the same number of deals as scale deals, moving to neighboring markets, and expanding their share in existing markets. Most importantly, they create repeatable models for identifying, evaluating, and closing good offers. In general, they see that many good prospects have to be followed and that the risks associated with the risk are reduced with the experience

. Service Ace

• For traditional capital-intensive industries, service is a very lucrative business, which results in a better and faster return on investment than new production facilities, large-scale research and development programs or acquisitions

• Indeed, investment in the service is the only way to sustainably increase profits in a tough economic environment. Investing in a service business also reduces capital intensity

• Investing in a world-class service business can become a strategic asset and raise a competitor's position in an environment where product and cost differentiation is difficult to achieve. The range of services, which is larger than some others, can change the industry and the company. Here, too, it can be stated that mapping the profit bases can help determine the potential size of service companies and the highest returns.

o It's no question that companies in capital-intensive industries are operating in difficult environments today. However, leadership teams committed to a bold ambition have the opportunity to break away from the package and achieve double-digit yields on capital costs.

Best Business Practices for Financial Health – For a Profit Portfolio:

• Find the Most Profitable Profit Piles in Your Businesses

• Set the Cost of Growth and Capex Optimization

• Search for

• Developing in-house M & A expertise and a structured timetable of potential transactions

• Investing in related service businesses

Leadership teams that take these steps not only give back tremendous boost will help as well as in rebuilding competitive advantage and winning companies in an altered industrial environment.

Reengineering Strategies i i • Redesign business processes is an approach that allows better support for the organization's work and lowering costs.

• Reengineering provides a high level of assessment for the organization's mission, strategic goals and customer needs

• In this core assessment of the Mission and Goals, reengineering focuses on the organization's business processes – the steps and procedures that govern the resources to produce products and products that meet the needs of some customers or markets

• Reengineering identifies, analyzes and transforms the core business processes of the organization with the aim of dramatically improving critical performance metrics such as cost, quality, service and speed.

• Reengineering acknowledges that an organization's business processes are fragmented to subprocesses that are performed within multiple specific functional areas within the organization.

• The CFO Act focuses on significantly improving the government's financial management and reporting practice. Determining Appropriate Financial Systems with Precise Data is Crucial to Measuring Performance and Reducing Costs of Operations

Management and Decision Making Structure

• Finding a Proposal to Reduce Costs, Make it Practical and Acceptable

• Determined Prices and Costs

• Organize for results and non-tasks

• Users of process outputs must implement the process


• Managing Geographically Dispersed Resources

Policies and Rules

• Developing Rules and Procedures

• Compliance Requirements

• Environmental Compatibility

Information and Technology

The Process

• All Activities

• Recording Reports and New

• Organization Reorganization Evaluation Framework

• Evaluating the Organization's Reorganization Decision

• Re-Evaluating Mission and Strategic Goals

Identifying Performance Problems and Defining Development Goals

• Commitment to Reorganization

• Evaluating the Development of the New Process

• Proper Management of the Reengineering Project

• Analyzing Target Process and Developing Available Alternatives

• Good Business Closing the Case for the New Process

] • Evaluating the Implementation and Results of the Project

• Following a Comprehensive Implementation Plan

• Managers for Managing Change Management Issues


Financial managers need to focus more on economic and performance-enhancing factors and have to understand that the scarce efficient allocation of resources to help them reach their financial position. The CFO needs to develop a performance management capability capable of:

• Visibility and analysis of information to support resource allocation

• Support the decision making process by providing appropriate information to the right people at the right time [19659002] • Present the financial implications of different choices and scenarios to enable the organization to predict and compare results

• Encourage managers and executives to make decisions that maximize marginal contribution

• Allow a data-driven view of resource allocation through a full value chain (corporate strategy, sales, marketing and customer service, supply chain production, finance, HR, law and compliance) [19659002] • Identify the key decision points that provide prospects for economic performance across the business, financial managers can provide valuable insight into the decision making or defending marginal l contributions through the value chain. By knowing in detail how and where sales increase leads to an increase in profits, it can provide an objective assessment of fixed and variable costs and then identify how to reduce revenue costs while increasing profit share

. Creating a clear, forward-looking field of view of relevant data on critical decision points

Finance should have access to a robust data set that is organized around the decisions that bring the highest economic value, including an assessment of the opportunity cost. For this, accurate, verifiable underlying data is required and it is necessary to understand how the data relate to the value chain decisions. This allows the CFO to carry out scenarios around the various decision points.

• Developing Managed Harmonized Performance Management Processes

The finance minister should be able to translate insight and understanding into the desired end product – making reasonable decisions that maximize the desired economic return. Aligning traditional resource allocation processes with business goals promotes repeatability and sustainability of the organization

• Ensuring compliance and ensuring that the voice of financial speech is heard

The CFO and the financial function must be in accordance with the within the organization to be able to influence decision-making and action. In addition, financial professionals need to improve communication and influence skills to make sure that they are listening to their voices and evaluating and acting on their advice.

Source by sbobet

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