We can’t emphasize this enough here at CFO Brew: The finance executive’s role has evolved from a tactical numbers cruncher to a true strategic business leader. A key part of that: Identifying and mitigating the vast business risks deluging businesses.
According to a new Travelers survey, “identifying and mitigating various business risks” is a top-three skill required of CFOs. It ties the ability to manage internal and external stakeholder relationships as the second most important skill for the role (at 52%), and is behind only the need for strategic planning for future organizational success and resiliency (62%).
Traditionally, the path to the CFO was to “get your MBA and you go do numbers for a company,” Joan Woodward, president of Travelers Institute, the insurance carrier’s public-policy arm, told CFO Brew. “Now, it just encompasses so much more strategic risk understanding, mitigating, and—hopefully—preventing.”
The insurance giant surveyed more than 600 CFOs in insurance decision-making positions at large companies (500-plus employees), and found that two-thirds of respondents “have sole responsibility” for procurement decisions when it comes to property/casualty insurance.
It appears that CFOs and their organizations aren’t just sitting on their hands when it comes to risk management, either. Nearly two-thirds (62%) of companies’ risk management activities are proactive, according to the survey. The remaining 38% are reactive, meaning that processes to manage those particular risks aren’t implemented until after an event has occurred, Travelers noted in its report.
Woodward recommended that organizations identify the risks they are exposed to—filtering out those that don’t apply to their business—and creating a continuity plan for each risk event. She also acknowledged that some risks are simply hard to predict, such as the devastating supply chain consequences of the Covid-19 pandemic.
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“You can say, ‘There’s so many exogenous factors that I can’t control as a CFO,’ and that’s so true,” she said.
The survey found an extensive network of internal and external partners that CFOs rely on to help them manage risks, “with themselves at the center of the decision-making process.” A majority (60%) of CFOs said they rely on risk managers, 1 in 4 rely on the CIO and insurance agents or brokers, 35% turn on insights from insurance carriers, and one-third consult with human resources.
Woodward said that organizations shouldn’t miss out on the wealth of knowledge that insurance carriers and brokers have. Whereas one business may not be sure how to navigate a specific risk, their insurance partners likely have seen and will have advice to give.
“I don’t want to use the phrase ‘we’ve seen it all,’ but I think we’ve seen it all in our business,” she said. “If you may be in a siloed business—say you’re a small print shop or a small manufacturer of a specific item—the risks that you could encounter have been experienced by other businesses that we’ve known about, we’ve mitigated, and restored them.”
Survey respondents’ top concerns included economic uncertainty, market competition, acquiring and retaining talent, and inflation. Their greatest sources of optimism were the financial stability of their organizations, their org’s corporate reputation, customer satisfaction and retention, and artificial intelligence. It’s worth noting that consulting firm Gartner recently warned finance leaders to temper their expectations amid peak GenAI hype.