Wednesday, 17 July 2013

Even The CFO Is Focused On Risk!

Authored by Mickey North Rizza

Risk continues to be a hot topic for businesses; but like the old adage about EF Hutton, when the CFO starts talking, people start listening — or in this case, start strategizing for the future.

At a recent Wall Street Journal CFO Network Conference, attendees noted four critical aspects to prepare for global business risks: Thinking regionally; Cyber-security; Manage the supply chain; and Interrelated risks. Each area was well defined, but also left some room for further thought.


Think Regionally – Companies should align strategies with governments of countries in which they operate and spend more time developing regional (not global growth plans). A prime example is Chip Starnes, CEO of Specialty Medical Supplies, who was literally held captive by his Beijing workforce. The workers were upset because the employees did not believe they were treated fairly. The company moved part of its Chinese factory to India, laid off 35 Chinese workers whom all received severance packages. But according to the workers, the company didn’t guarantee the remaining employees who are still employed the same severance package.

Cybersecurity – Companies should tackle their own threats, push for government intervention and seek pacts between governments on the issue. There should be a limit on who has access to information. The recent US Government concerns over the National Security Agencies issues with Edward Snowden are just the tip of the iceberg on security, not to mention the intelligence and cyber concerns created by this debacle.

Manage Supply Chain – The supply chain should be part of a regular risk assessment and have redundancy built in. Also companies need to assess risks in business processes, so that fragility and volatility of regional economies is understood. Many companies are shortening their supply chains with localization efforts that provide more flexibility to manage demand and supply, thus reducing exposure.

Interrelated Risks – Risks don’t necessarily come as discrete events, so companies must be prepared for multiple events. The senior level management teams need to tackle these issues. Businesses know that cause and effect is all part of their everyday performance. Most concerns are interrelated such as demand falling off, create less need of supply, reducing revenue and hurting performance.


 

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