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The four-letter word that can cost you big

Jennifer Azara
by Jennifer Azara
February 27, 2009
  • Budgeting and Forecasting
2 minute read
  • SHARE ON

managing-risk

They’re four little letters that represent a whole lot of money: R-I-S-K. 

Take on too much and your company could be vulnerable to some very expensive hits. Take on too little — even in this economy — and you could miss a major revenue-generating opportunity.

It’s no wonder so many of your peers are rethinking where to draw that line. The proof:

• 72% of CFOs expressed concern about their own companies’ risk management practices, and

• 55% of finance execs say they’ll put their own risk management practices under the microscope in the near future.

Those stats come straight from a recent survey by Towers Perrin.

So what’s your best move now? It’s worth taking a step back to look at the three main areas where your organization could have some exposures so you can shore them up — and even ID some potential opportunities:

1. Demand risks. You’ve seen the stats month after month: Companies have been putting the brakes on spending in record numbers. So does your business have a plan in case your usual customers tighten up too far? Try everything — from having Credit look at customer files to see who could be buying more, to brainstorming with Sales and Marketing to ID possible new promotions.

2. Cost risks. No doubt you’ve put the edict out that all employees — at every level of the organization — should be paying more attention to their spending. A good move. But you probably also want to make sure that strategy isn’t backfiring, too. If employees make shortsighted choices to save a buck, your company could end up paying a lot more in the long run.

3. Financing risks. The banks have no shortage of cash woes of their own these days. But you certainly don’t want them passed into your company. Now’s a critical time to make sure your company has backup plans for both short-term and long-term financing so you don’t get caught short.

Jennifer Azara
Jennifer Azara
Jennifer, a member of the CFO Daily News staff, has covered business and finance for more than 22 years. She has written for CFOs, credit and collections professionals and accounts payable practitioners and has spoken at industry conferences on sales and use tax compliance.

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