An interesting new survey of CFOs from TD Bank suggests that there is a strong corollary between increasing confidence in the business environment and a willingness to take on more risk, which can lead to further growth. In this context, it is a CFO’s ability to manage risk that tilts the business trajectory into an upward direction.
However, it’s important to note that only a minority of the CFOs who are more confident in their risk management abilities plan to take on more risks. The anemic economic recovery is still producing headwinds.
About the Research
TD Bank has published an infographic summarizing this research, which we incorporate below. The bank commissioned the survey by ORC International in September and October 2013, gathering the views of 150 CFOs equally divided between mid-sized ($50 to $250 million revenue) and large (over $250 million) companies.
Growth and Risk Management
The important nugget uncovered in this survey is that improving risk management is one component of investment and growth. Almost by definition, reducing risks improves the expected return on investment, which is another way to project “growth.” In other words, executives’ ability to manage risks better improves their ability to cope with the challenges in their markets.
Proactive risk management is a strategic asset for growth.
The research indicates that between one-third and one-half of the surveyed CFOs have increased risk management since 2008, including practices such as increased review of cash positions and enhanced risk reporting. The summary report does not tell us whether companies willing to take on more risk actually grew faster, but it is clear that the CFOs who had a bullish attitude toward growth came from the pool of executives who were more confident in their ability to manage risks.
Risk management in itself helps to build business confidence, leading to more investment, and subsequently, growth. The great thing about this is that CFOs have it within their power to improve comprehensive risk management practices.
What will you do to improve the financial outcomes of your business through better risk management?
Source: Risk Management Monitor