What have you been doing to manage risk at your company? CFOs across the country have been working hard to control risk in the recovering economy and are now beginning to feel good about their companies’ outlooks.
A national survey from TD Bank found over a third of finance chiefs claim that they are now more confident in the U.S. economy. Perhaps more importantly, over half of the CFOs said they were confident in their companies’ prospects.
But that doesn’t mean they don’t anticipate any challenges. CFOs are most concerned about these factors impacting their companies, according to the survey:
- economic uncertainty (67%)
- future regulatory change (66%), and
- increasing costs of doing business (66%).
On top of that, finance chiefs are also facing individual challenges related to managing risk at their companies. These were the most common:
- ability to accurately forecast financial risk (53%)
- managing relationships with vendors that carry risk (36%), and
- not having enough or accurate data to evaluate risk (29%).
Where the confidence comes from
Why then, did a majority of CFOs – over two-thirds – claim they were confident in their ability to handle risk? It’s all about proactive risk management. Finance chiefs are taking steps to control risk starting with internal controls and working their way toward handling external relationships.
Here are the three most popular strategies CFOs are using to manage risk internally, according to the survey:
- increasing visibility into the company’s cash position (50%)
- increasing and enhancing risk reporting (38%), and
- adopting a more conservative approach to financial risk (37%).
Of course, companies can still be affected by business relationships with vendors that carry too much risk. Since over a third of CFOs consider managing vendor relations to be one of their top risk-management challenges, it’s no surprise many are focusing on how to improve that particular area of business.
In fact, 44% percent of finance chiefs said they were working on strengthening their evaluations of their vendors’ risk-management practices. Apparently not all of them are making the cut: Forty percent of CFOs reported they had severed professional ties with vendors who were carried too much risk.
Only 25% of the CFOs surveyed claimed they were confident and eager to take on new risks. But, as more finance chiefs continue to effectively manage risk at their own companies, expect that number to grow.