Financial Risk Management: The Cornerstone Of Business Strategy

Henner Schliebs

Part 2 in a 3-part series. Read Part 1 and Part 3.

Research from Harvard Business Review Analytic Services shows that more than 67% of survey respondents said that risk management has become somewhat or significantly more important over the past three years. To find out more about how CFOs are aligning business strategy with identified risks, SAP Finance spoke to two finance experts:

  • Marc Havercroft, COO & vice president, Digital Strategy & Transformation, SAP SuccessFactors
  • Amy Wu, SVP of Finance, Global Digital Division, Discovery Inc.

Risk management isn’t gambling

“The key challenge for leaders, CFOs, and the like now, is really about what bets they’re willing to make,” says Havercroft. “If the risk is limited now, then based on data insights, you really need to think about more medium- and long-term decisions rather than short-term decisions.”

CFOs frequently talk about risk management using gambling terminology – making “bets,” or “playing the odds.” But CFOs can stack the deck in ways that a casino would never allow.

With 72% of finance executives reporting an increase in the amount of time and resources allocated to risk management, it makes sense to ensure that the data being acted upon is dependable.

For Havercroft, it’s the CFO’s responsibility to wrangle data. “CFOs need to have a tight rein on financial information and data that can be layered on top of people information and commercial information to decide, for example, whether the acquisition in mainland Europe is a good one; whether they should expand their product line into X or Y,” he says.

Without that tight rein, your business strategy may be missing important context from the market, consumers, and other important data sources. And enterprise risk management software can help bring those data sources together to help CFOs identify, analyze, and plan for risk activities.

Balancing risk and opportunity

Identifying opportunity is just as important as avoiding risk. As Havercroft puts it, “A CFO should really be concentrating on the economics of the marketplace that they’re in and looking for two factors: risks to the current business and commercial plan, and — above all in this digital age — opportunity.”

Wu agrees, adding that finding opportunity is a crucial part of her daily responsibilities. “I spend a lot of my time looking at balancing growth versus risk,” she says. “Any CFO should look at that, but in my case, the risk becomes the capital allocation. How much cash are we burning in this division? Is it a risk to the business?”

For Wu, discovering opportunities means expanding beyond the traditional finance role to look at the business more holistically. “I should be almost interchangeable with the GM or the COO…plus the fact that I’m also an expert on finance and budgeting specifically,” she says.

Identifying opportunities and avoiding risk depends on data, both traditional finance data and information from across the organization, from HR to customer satisfaction.

Up the ante

Technology plays a central role in helping CFOs make risk management more data-driven. The ability to automatically collect, consolidate, and analyze data can help CFOs make longer-range predictions and smarter risk-management bets, and maximize the payoff from capitalizing on opportunity.

Want to learn more about managing risk through better financial data? Read The CFO’s Guide to the New Era of Intelligent Finance.

Why have AI, machine learning, predictive insights, and digital assistants become the must-have new tools of forward-thinking CFOs to drive business performance? Watch the webcast Tuesday, Nov. 6.

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About Henner Schliebs

Henner Schliebs is global vice president Audience Marketing for SAP S/4HANA and Finance at SAP. He is a progressive sales/marketing executive with 15+ years of experience in business software solutions focused on corporate functions. He has strong marketing and go-to-market skills and a proven track record in enterprise software solutions, along with significant experience in solution management and customer engagement.