Concrete strategic risk management requires a combined effort of top decision makers. Being the stewards of an enterprise’s financial health, a good CFO plays a leading role in orchestrating all these pursuits.

Role of a CFO in Mitigating Risk in different areas of Business:

A recent EY survey The DNA of the CFO, including 769 financial leaders showed that about 57% quoted risk management as a critical roleplay in the future.  In fact, a CFO is the first line of defence in managing and mitigating different areas of risk any organization faces in present times.

Key risks of the organization are categorised as below:

  1. Financial Risk: A failure to prevent financial debacle is the major risk any organization faces. Some of the financial risk are:
  • Debt Risk: A CFO is responsible for controlling debt risk by avoiding high or variable interest rate based loans or conditional loan agreements.
  • Compliance Risk: A CFO ensures timely filing of federal and state tax returns to maintain a company’s relationship with shareholders and regulators.
  • Liquidity Risk: A CFO handles cash flow issues by creating a rolling budget and forecast that is analysed regularly.

2. Operational Risk: If your organization is based on buying and selling several products and services, there are a variety of risks your organization is vulnerable to:

  • Compliance Risk: In any industry, you need to follow certain rules and bear consequences in case of non-compliance. For example, selling unreliable or harmful products, unfair treatment of employees, etc. All these aspects are controlled by a CFO through devising strategies to stay compliant.
  • Process Risk: During strategic planning, a CFO is involved in identifying and mitigating risks at every step. For example, whether the organization would be at a higher risk if the manufacturing process is outsourced. A CFO evaluates risks involved before implementing any strategy.
  • Personnel Risks: During the struggling phase of a company, employees leave; during booming phases, employees seek better opportunities. A CFO strategize ways to manage salaries, bonuses, training, etc. to retain employees in crucial times.
  • Supply Chain Risks: A CFO collaborates with an organization’s logistic professionals for important decision making about managing quality issues, labor risk, and data breaches on part of the supplier etc.

3. IT Risk: Now that every company operates online, the risk of data breach is million times higher. A company must manage following areas of IT risks:

  • Security Risks: A CFO pragmatically works to evaluate financial impact of any risk and the cost of avoiding, preventing or dealing with the risks. He constantly supervises the channels through which data is being channelized and looks AT it see where to invest to protect the data.
  • Contract Risks: A CFO and CTO are responsible for evaluating and mitigating risk related to outsourced IT services under a contract and build a contract watertight enough to ensure nothing falls through the cracks and there is enough coverage towards data security. A smart CFO makes is possible flawlessly.

4. Other Risks: Any organization is prone to the risks posed by natural catastrophes such as Covid19, political jeopardy of a government. A CFO prevents immediate reactions, minimizes damage, and restores balance of the organization.

All in all, a CFO is responsible for:

  • Identifying the impending risks to an organization.
  • Evaluating the probability and impact of each risk for every new strategy.
  • Periodically reporting (quarterly, twice a year, or annually) the measures taken, and results delivered from such actions.

Risk-management, a Plus for Start-ups

The risk-taking aspect of a CFO is an additional advantage for startups, where CEOs fear to change the old strategies and take risks. With the help of a CFO, an enterprise can take a calculated risk and be prepared for the possible failures to be handled with alternative strategies. With the confidence of a CFO, a CEO can dare to spread its wings for a change and for the growth of its enterprise from its stagnant state.

The author of this article is finance professional with 20+ years of experience. If you need to reach out, do write us back at

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