The CFO'S Perspective

One of your most important tasks as a business leader and manager is mitigating risk. Understanding what kind of risk exists, planning for the impact of this risk, and executing continuity plans to keep the organization operational during a disruption is of paramount importance. The earlier risk can be identified, assessed, managed, and integrated into strategic planning, the better.

Typically, this burden falls on the C-Suite, but leaders at all levels should be included in the planning stage to ensure buy-in across the company. While it is easy to task an individual with overseeing risk management, ideally, it should not roll up to a single person. An emphasis on risk mitigation should be ingrained across the organization with alignment and compliance at every level. CFOs leading the charge can get their organizations on board to share the responsibility by taking a four-step approach to business continuity planning.

Today’s executive financial hiring numbers reveal a surprising trend! Recent data shows that the rate of companies hiring externally for their Chief Financial Officer (CFO) role is at a 10-year high. The prevailing theory as to why so many companies are looking outside their organization to hire a CFO is that succession planning for CFOs has been deprioritized in recent years as they have focused on tackling their organizations’ more pressing needs instead. And yet, succession planning remains a critical activity to avoid the disruption and cost associated with needing to look externally for a replacement when an organization’s CFO leaves or retires.

Originally published: 2/15/2021
Updated: 3/4/2024

For those not familiar with the term, a decision tree is a flow chart that works through all possible response options in a scenario to analyze resulting outcomes. Basically, it is a visual version of an “if this then that” statement across all possible alternatives.

The “branches” off each decision alternative that result use data analysis to forecast the most likely outcome of each decision. When one decision leads to another decision that must be made, that branch splits to continue extrapolating the effects of each subsequent decision. The result is a tree-like diagram (hence the name) that is easy to understand and interpret.

Decision trees can be more conceptual in nature or have numbers to back up decision scenarios, as is the case of pricing changes affecting revenue figures. For decision trees with complicated calculations, a software program can assign values and probabilities to streamline decision-making. A decision tree is a critical part of strategic planning because it allows decision makers to analyze the effects of a significant change throughout different areas of the business.

What would we do without our accountants? We rely on them for accuracy, reporting, transaction processing, analysis, and financial advice. For non-accountants, the discipline can be a mystery. So, we try to find a good accountant to add to our team and then we trust them to do their job. That’s what we should do, right?

Actually, no.

You shouldn’t trust your accountant. Well, hopefully, you can trust them, but you shouldn’t.

We’ve all heard about “phishing” – malicious emails. As Microsoft notes below, they’re hugely popular among cyber thieves. They also happen to be hugely lucrative (which is why they’re so popular!).  

Uncertainty, a term frequently mentioned by business leaders today, essentially refers to business risk - an area CFOs often focus on. Let's delve into the various types of risk a business may face.

The collapse of Silicon Valley Bank (SVB) was a sudden jolt to the banking system. SVB was a leading financial institution founded in 1983 that catered to the tech industry. This unexpected development has had far-reaching consequences, particularly regarding risk evaluation for Chief Financial Officers (CFOs) tasked with assessing and mitigating potential risks within their organizations.

I am pleased to note that First Citizens Bank (Nasdaq: FCNCA) announced on March 27, 2023, that it entered into an agreement with the Federal Deposit Insurance Corporation (FDIC) to purchase all of the assets and liabilities of Silicon Valley Bridge Bank, N.A. The transaction is structured as a whole bank purchase and assumption agreement with loss share coverage. Silicon Valley Bank is now a division of First Citizens Bank.

While the acquisition of SVB by First Citizens is a successful one, there are lessons to be learned from the original event. In this article, I will explore the fallout, identify the emerging risks, and discuss what I think it means for CFOs as they navigate an increasingly complex risk landscape.

“How do you build a three-year financial model?” It’s a question we get (and answer) a lot.

A financial model is a type of financial projection that pulls together important data to allow organizations to analyze their current financial position and predict their future financial position. While effective financial modeling takes significant time and expertise to complete, the considerable benefits provided make it well worth the investment. Financial modeling is an essential tool used to manage risk, allocate resources, make smart investments, secure funding, and develop long-term growth strategies.

Some projections are over a longer time horizon while others only cover a short time horizon. However, whether your financial model covers two, three, five, or ten years, it’s important to understand what it should accomplish, why you should do one, and what it should include. Find out now why you need financial modeling and how to build a financial model for your organization that will offer the insights needed to make key strategic decisions.