Risk in the business world - Essay Example

Risk Management It is difficult to objectively say how much risk is involved because risk cannot be quantified. The effects of a risk, if encountered, can be far-reaching than anticipated; “when bad things happen, they can occur as an unexpected bundle of correlated or uncorrelated events that could add up to a significant value-killer loss” (WSJ, 2014). Moreover, risk inherent in any decision varies from one context and situation to another. However, this much can be said that a CFO is generally faced with more risks than managers in other departments in an organization.

There are four basic ways in which a CFO can handle risk; avoid, reduce, assume, or transfer the risk (Silverman, n.d.). A CFO’s attempts should be directed at managing risk in the very order as mentioned here. Personally, a CFO handles risks by collaborating with and influencing the CEO, and also by maintaining independence (Egon Zehnder International, 2008). The challenge for a CFO is to focus on controls, and at the same time, on business partnering. Being able to balance the two conflicting claims enables a CFO to deliver business results.

Professionally, a CFO handles risk by trying to assess it in advance and informing the concerned authorities so that it can be managed in time and effectively, if encountered. The best source of risk assessment is historical records and past experiences coupled with expert opinion. In addition, various software like Primavera Risk Analysis can be used to assess and manage risks involved in a project. References:Egon Zehnder International. (2008). Managing the Evolving Relationship between the CEO and the CFO.

Retrieved from http://www.egonzehnder.com/files/ceocfo.pdf. Silverman, J. R. (n.d.). Risk Management. Retrieved from http://www.yourownfamilycfo.com/Services.2.htm. Wall Street Journal. (2014). 10 Issues Keeping CFOs Up at Night. Retrieved from http://deloitte.wsj.com/riskandcompliance/2014/07/08/10-issues-keeping-cfos-up-at-night/.