What Does a CFO Do, Risk Management & Governance

http://GatewayCFO.com - In our continuing series detailing the CFO's role in a small business, we conclude with the final installment on "Risk Management and Governance."




To some, risk management sounds nebulous. To others, it implies a conservative approach to business. Yet it does not have to be either. Risk management can be handled within a structured framework, even for small business, which can be utilized to assess potential risks according to your tolerance.

Wikipedia defines "risk management" as the identification, assessment, and prioritization of risks followed by coordinated and economical application of resources to minimize, monitor, and control the probability and/or impact of unfortunate events or to maximize the realization of opportunities.

More specifically, risk management can be broken down into a few areas. For one, determining the necessary and appropriate insurance coverages is a good place to start. Your CFO should help you weigh costs with potential risks. On a similar note, the CFO should oversee all human resources policies. By doing so, the CFO should be able to minimize potential liabilities.

Furthermore, the CFO should manage the legal affairs of your company, and provide litigation support in a manner that minimizes potential liability. For some companies, interactions and coordination with attorneys can be an arduous task. Your CFO should help keep these costs to a minimum, and know when it's the right time to get the lawyers on the phone. It helps tremendously to have a CFO that has a strong legal background in your industry.

Another area of great risk are your creditors and debtors. Assessing credit and counter-party risk is critical to ensuring that you don't rack up an unnecessary amount of bad debt write-offs and losses. Which of your suppliers could be in trouble, and what could the impact be on your business? If a supplier shuts down, what will be the impact? What are the company's internal credit risks? Is the company heading in a direction where it could become unbankable?

All of these areas should be at the forefront of your CFO's responsibilities, to insure that your organization is effectively managing risk in a proactive manner.

Thank you for following along in our "What Does a CFO Do" series, if you haven't seen the other videos in the series please visit our YouTube channel. Also stop by http://GatewayCFO.com to get your FREE copy of Cash Flow Clarity, a cash planning system that will finally allow you to get your cash flow under control, make more money, and regain your peace of mind.

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• what does a cfo do
• WhatDoesACFODo
• Risk Management
• Governance
• Insurance
• HR
• Creditors
• Debtors
• business finance
• cfo
• chief financial officer