When was the last time you encountered risk? After you take into account the definition, it was probably more recent than you think. The Dictionary describes risk as an “uncertain possibility of loss or injury”. In some ways, you begin to face that possibility the moment you get out of bed each morning.
Your business faces risk with similar regularity. As soon as it begins to operate, there’s the possibility that there will be a major recession, or that new competition will spring up and take away all your clients. Of course, that shouldn’t stop you going into business: if it did, the economy would grind to a halt. But it should mean that you spend time understanding how risk will affect your company. An outsourced CFO can help you do this. Here are four ways how:
- An outsourced CFO will help you master the ABCs of business risk. What are the ways in which your business could face loss or injury? And how could these losses affect your company?
An experienced outsourced CFO will help you answer these questions. He or she will help you draw the fine line between being too risk averse and taking on an excessive amount of risk for your business. In addition to this, an outsourced CFO will help you know what poses real threat to your business, and what seems riskier than it really is.
Harold Kerzner, in his book about Project Management, says “Proper risk management will reduce not only the likelihood of an event occurring, but also the magnitude of its impact.”
- An outsourced CFO will help your risk management become seamless.
In the same book, Kerzner says: “Proper risk management implies control of possible future events, and is proactive rather than reactive.
“Risk management is not a separate project office activity assigned to a risk management department, but rather is one aspect of a sound technical management program,” Kerzner continues. Your outsourced CFO not only understands this but has the technical insight and know-how to implement risk management as a way of doing business throughout your company.”
- An outsourced CFO can help you manage audit risk. Chances are, your outsourced CFO was once an auditor. He or she knows what auditors are looking out for and how they are assessing risk within your company. He understands the trend and ratio analyses that will be used as your company undergoes the audit process. She also understands how to keep your audit trail as neat and transparent as possible, meaning that your company is more likely to have clean, hassle-free audits each year
- Your outsourced CFO knows how to predict the unexpected. Addy Pattantyus, director of strategic consulting firm Strategic Modularity says that the modern day era presents an entirely new set of risks from what was faced in previous decades and centuries. “Airplanes fall out of the sky, fertilizer plants and petrochemical plants explode, vehicles crash, houses burn down, and so forth. We have modern systemic risks, like pandemics, food poisoning, financial system crashes and stock market collapses.
“For at least the last three or four millennia, our forward progress has been limited only by humankind’s ability to accept risk,” says Pattantyus. “For each innovative forward step, somewhere, somebody had to innovate, embracing uncertainty to produce a result despite the risks. Professional managers and business people anticipate unlikely events and take positive steps to manage company risk exposure every day. Understanding business risk and learning to manage it effectively are vital aspects of running any business.”
Your outsourced CFO can assess the likelihood of a technology failure that could cripple your business, or a massive storm decimating your warehouses and equipment. While entrepreneurs generally (and necessarily) have an optimistic outlook, your outsourced CFO is trained to think “what if …?” and what to do about it.
Risk is a necessary part of running a business, and so is understanding and managing it. If you could benefit from some professional assistance with this, contact The Finance Team. An outsourced CFO can provide you with the help you need for the period of time that you need it.
Photo credit: dskdesign / 123RF Stock Photo