Risk stewardship: The next frontier in building shareholder value

Published: May 1, 2006

Executive summary

The job of Chief Financial Officer has evolved dramatically over the last decade. Once seen as merely the chief accounting officer and technical expert, narrowly focused on the firm’s financial statements and capital structure, the CFO today operates more as a business partner with the Chief Executive Officer, with a much larger mandate for ensuring that the organization’s strategy is oriented toward building shareholder value (see “Not your Father’s CFO,” strategy+business, spring 2005). At the same time, company leaders are recognizing that risk management is an essential ingredient in strategic planning. Increasingly, many are finding that strategic risk management can enhance, as well as protect, shareholder value.

Today’s CFO must continue to serve in the traditional role of technical expert on capital structure, profit-and-loss, and balance sheet issues, as well as remain a respected adviser on external market issues and internal performance trends. In addition, however, the enterprise-wide challenges and opportunities that CFOs face as strategic activists will increasingly involve risk management. Within this context, senior leadership needs to consider three major questions about their risk management program: which risks to focus on, how to best implement risk management systems, and who should be driving the overall risk management program. We believe that the answer to the who question can be the CFO, when that individual is strategically oriented.

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Risk stewardship: The next frontier in building shareholder value