What Else Could Go Wrong? (Risk management)
Use Strengths to Attack, Not Just Offset Risks
On Tuesday, September 29, 2020, CFOs from several industries participated in a Roundtable Intensive on the topic of risk: “What Else Could Go Wrong?” Michael Best was our sponsor.
Two key ideas: Use your strengths to resolve, not just counterbalance risks, and use a systematic approach to risk analysis to become even stronger.
Members
Beth Dettman, Dan Kelly, Randy Kyle, Mark Lenerz, Marcie Mahuta, Bill Mitchell, Rick Perrin, Glen Stiteley, Derrick Van Mell
Kick-off
Dan Kelly, CFO of American Family, shared two stories about risk. Not reported to protect confidentiality.
Discussion questions
- How have the probabilities and consequences of last year’s risks shifted?
- How have you helped the CEO or board keep current on the shifting risk position?
- What new ways are you managing the risk in your long-term plans?
Best practices
Identify top risks
- Retaining top talent employees (see below)
- Recession risks (see below)
- Interest rate risks
- Governmental/regulatory risks
- Second-hand risks, i.e., those faced by customers and suppliers
- Emerging risks: epidemic, civil disturbance
- Financial loss or weaknesses are resultants of risks gone bad
- New risks and opportunities generate yet other risks and opportunities
Mitigate retention risks
- A threat to retention with remote work is maintaining an attractive culture
- That COVID forced remote work actually helped in retention and productivity
- Increase efforts to create excellent and individualized opportunities
- Book: “Dream Manager,” by Matthew Kelly
- Focus on wellness
- Recognize stresses on employees, particularly those with children at home
- Need to reset work/life balance
- Working remotely has reduced current and future space needs
- Remember to celebrate successes and team spirit
Understand recession risks
- A lasting recession (e.g., “Pandemic Depression”) amplifies and creates risks
- Recession will likely outlast introduction of COVID vaccine, yet…
- Participants mostly optimistic
Follow general risk planning and mitigation practices
- Every organization should have a system for assessing and communicating risks
- Board members, owners and executives must know their business and keep current
- A comprehensive review of risk and themes lets managers focus with confidence
- Understand who controls the risks, though some are not controllable
- Risks should be “stress-tested,” i.e., analyzed for financial effects
- Need for disaster planning
- Accept that some business units might need subsidy to offset their specific risks
- Use analysis of risks to spot new opportunities to improve
- Keep board, CEO and executives informed about risks
- Need to build awareness
Make your business as good as it can be is the best way to prepare for risks
- Maintaining customer diversification protects against being affect by their risks
- Keep developing new products and services
- Continue to adopt new technologies to create efficiencies and share information
- Invest in the talent to deploy and use that technology and information
- CFO needs to be much more generalist manager than finance specialist
