When describing what I do as a CFO, I often say we create strategies to convert non-cash assets into cash. For example collecting A/R, minimizing inventory or improving capital equipment utilization. I also add that our job is to mitigate risk.
Mitigating risk is really about identifying risk and creating alternatives to reduce the chance of a negative event damaging the organization. Strategic risk is often the most difficult to identify. A company’s leadership team is so tightly attached to its strategy that it can miss the small indicators that are early warning signs.
Working with the board, CFO’s can monitor early warning signs and facilitate the use of outside experts. Doing these things will put an organization in a better position to appropriately address strategic risk.
Companies staying ignorant of strategic risks do so at their own peril.