Ask the Expert: Should Risk Management be a Priority for CFOs?

This blog is part of our Ask the Expert series on improving the customer journey by evaluating and improving customer interactions across various touch points within your organization.

I sat down with Robert Nix, a finance expert on our Business Consulting team. Robert has more than 25 years' experience in the financial and accounting field; he has served as an investment banker and also held several CFO roles. Robert is a CPA, CMA, MBA and Lean Six Sigma Certified.

We discussed how vital it is for CFOs to be thinking about customers and why they should play a vital role in risk monitoring strategy. 

Q: From a CFO’s perspective, what is risk management?

A: Risk is about the potential loss or gain of something of value. CFO risk management is about identifying, assessing and prioritizing the application of resources to minimize, monitor and control the probability and/or impact of that potential. The goal is to intentionally manage uncertainty to minimize impact.

Q: Why should CFOs prioritize risk management related to customers and sales?

A: Many CFOs stay focused on revenue and sales. However, increasingly more, CFOs are digging deeper to understand what is driving both of those. They are digging into why sales and revenue are growing or declining. Lack of new sales and an increase in customer churn/decrease in spend aren’t always a result of sales not doing their job. In many cases, it’s the result of issues with the delivery and support of the desired customer experience. 

Today, the economic risk that organizations are exposed to is more expansive and changing more rapidly than ever before. One of the main risks is customer and sales loss. Customers are a fickle bunch with rapidly evolving expectations. Technology innovation and increasing competition offer more options for customers than ever before. These market changes (small shifts and dramatic disruptors) make managing the risk of customer and sales loss never-ending and the solution is temporary because market factors change so quickly. It is much easier for an organization to identify and adjust to risk while they are still making a strong net profit instead of reactively adjusting with net losses.

Q: How can organizations identify the reason for customer loss and take proper action?

A: They can start by asking themselves a number of questions including:

  • Are declining sales and revenue the result of unmet customer expectations or poor customer experience?  
  • Are customer experience issues caused by internal customer service, operational or supply chain issues that must be addressed and fixed to maintain viability?
  • Is the product type or mix improper for target customers?  Is innovation or SKU optimization needed to maintain viability?
  • Is the industry consolidating and acquisitions are needed to maintain viability?
  • Is there a temporary downturn and the company needs to right-size to maintain viability?
  • Is there a paradigm shift due to a market disruptor (Amazon, Uber, etc.) and a new strategy is needed to maintain viability?

Q: Those are great questions, but where are the answers?

A: The CFO can have a unique perspective around data, seeing the complete picture and not just revenue, cost or headcount. Their vantage point makes them uniquely suited to interpret what they are seeing in the data and help ID the root cause of changes in revenue and cost trends. This 360 degree view of the business allows them to monitor and spot risk early, if they have a means to wade through all of the data available. Many executives spend hours thrashing through spreadsheets looking for answers to growing the business. Tribridge works with customers to identify, access and display meaningful data quickly and efficiently to improve decision quality.

Q: How can a CFO proactively manage risks related to customers and changing market factors?

A: It is critical that a CFO develop a risk monitoring strategy with Key Performance Indicators (KPI) that hone in on key sales and customer metrics and are proactively tracked on a real-time basis.

A few important tips:  

  • Only use historical data to confirm real-time and forward looking information
  • Track marketing spend to closed sales and the percentage over time. Review the return on spend to determine whether its improving or declining
  • Include Sales Pipeline in the risk KPI.  Review the trends over time, analyzing the weighted value of the pipeline and whether its expanding or contracting
  • Sales should fully utilize a tool for sales forecasting and planning. Sales personnel should enter all leads with probability of close, so leaders can foresee issues before they impact the bottom line
  • Review Essential Customer Metrics to identify actionable insights
  • Identify early warning indicators of customer issues or potential churn and address  proactively 
  • Use a survey tool integrated into a KPI and track beyond the pipeline reports for early warning indicators. Sales Team Confidence Indicator surveys can give visibility beyond the sales pipeline 
  • Perform Vendor Surveys about their pipeline to expand perspective as to the state of the industry.  All these tools can add 30 to 120 days of increased visibility into risks on the horizon
  • Use advanced analytics to provide predictive indicators of what is likely to close, based on statistical models and historical data, rather than just sales person gut-feel

At Tribridge, we help CFOs with their risk management assessment and solution planning. We have expertise in Risk Monitoring KPIs, Essential Customer Metrics & Sales Confidence Indicators, as well as Business Intelligence & Analytics tools for reporting and analysis. 

To learn more about how your organization can benefit from improved risk management, reach out to Tribridge to help.

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