The CFO Dilemma
The position of a CFO is powerful. CFOs are the owners of budgeting processes and follow up on deviations. From a CFO´s perspective, deviations are unpleasant, and the ideal business year will be the one when budgets get overfulfilled. In quite some organizations, budgeting time is sandbagging time. People try to build pillows in budgets. Incentive systems talk about the willingness of organizations to deal with risk. And the 5P principle is clear on relevance and limits of perspectives.
CFOs must manage the company´s liquidity: Most CFOs don´t like risk, and project risk. However, if an organization is too strict on risk, the chances for new products and market segments will be limited, too. Suppressing risk will suppress future developments, too. Here are more companies having limited their chances of success tan organizations being too risk-linking.
CFOs will be held accountable for a proper planning and budgeting process. However, strategy and strategy execution will travel together with risk and risk management. From a shareholder´s perspective, sticking to the budget may be seen equal to financial success and attractiveness. CFOs will have to balance risk, and the CDO´s understanding of risk may differ to a CEO`s understanding of risk. In this context, it´s not too surprising to see in this simple example the huge potential of suppressing innovation by strict risk management.
There are few CFOs being known for their ambitious approach to new products/markets. We can see the clash of cultures when startups meet larger organizations. Latest when they get acquired and incorporated, cultures clash. There are solutions for such conflicts. Feel invited to talk to us for more insights.
