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Highly unpredictable demand and turbulence in financial markets may have a significant effect, the decision power of CFOs in the risk management can therefore produce an increasingly significant impact on the overall company performance.
Traditional models deal separately with decisions relating to risk management and with the definition of the optimal financial structure: the capital management seeks for the best composition of financing sources; the risk management instead engages in pure and financial risks, operating on the financial and insurance market.
Even the most recent models of risk analysis tend to separate the component of operational risk from the associated financial risk. Considering hedging strategies and those relating to business strategy separately leads to ignore the connections existing between them and the benefits that may arise.
In this way, the risk analysis should precede the generation of strategic alternatives, thus becoming a pivotal moment for the development choices. An important example in the financial sector is the concept of risk appetite, which is used to indicate the total amount of risk that an organization is able to accept: an increased risk appetite will tend to guide decisions on more aggressive strategic routes but that could foster greater levels of profitability.
It is therefore necessary to set these monitoring activities even within the CFO services. The generation of value through the management of risks is generated through well-defined paths: the definition of risk-taking and management strategy, the design of business models and risk-pricing models, the definition of methodologies for the implementation (planning and control system , incentives, reporting, ...) and finally the implementation into business processes.
An integrated model aims to support the management in planning and control activities by introducing the element of risk, hence its management process, as the tool for an objective and reliable assessment of the accessibility level of the expected results of the planning process.
The integration of these elements into a single reference model allows to transform the process of planning and control in a "living model" where the strategic development plan is a "live" tool; analysis are carried out to develop "alternative responses" to "alternative scenarios", the strategy is systematically related to operational actions, there is a structured approach to align the "company system", intended as an organization, processes and supporting tools, where you want to spread a culture of risk across the whole organization, in order to assume awareness and responsibilities in decisions.
SDG - CFO Services is ready to significantly enhance their models and processes in this area. Our recent success stories will be presented on this channel and can be also further discuss with each of you. Just let us know and keep in touch!
