Integrated ERM Becomes Critically Important to CFOs

Chief Financial Officers in corporations across the globe are becoming more involved in how their enterprises are managing both risk and information. There are many reasons for their greater involvement. However, the primary reason is that both risk and information have been managed historically in a fragmented way. As a result, the CFO has had great difficulty in understanding the broader financial implications of risk and performance across the enterprise. This need has been highlighted by IBM in their 2010 Global CFO Survey. The survey notes that from 2005 to 2010, there has been a 93% increase in the number of CFOs who view risk management as critically important and a 109% increase for those who view information integration as critically important (see chart below). These results from more than 1,900 CFOs demonstrate the pressing need for more integration and, as you can read below, the changing role of the CFO.

Across the Finance agenda, two activities – information integration and risk management – have become remarkably more prominent. Since 2005, the importance of integrating information has more than doubled, mirroring the exponential rise in information volume and velocity within businesses today. As one CFO from China asserted, “If I had complete freedom, integration of information would be my number one priority. Unfortunately, there are too many IT and business unit barriers at present.”

Among CFOs, managing enterprise risk also garners almost twice the attention it did in 2005. This is not a recent reaction. Back in our 2008 study, CFOs acknowledged serious shortcomings with risk management. Two out of three companies with revenues over US$5 billion had encountered material risk events within the prior three years. Of those, 42 percent admitted they were not well prepared.

We believe this sharp rise in the importance of risk management is further evidence of CFOs’ expanding purview. Finance leaders are no longer focused solely on financial risk but are becoming more involved in mitigating corporate risk in all its many forms – whether strategic, operational, geopolitical, legal or environmental. All forms of risk ultimately have a financial consequence, which is why it is essential for CFOs to be engaged in risk management.

With strategic partners such as Apptio, Approva and OpenPages, Wheelhouse Advisors can provide a total solution for CFOs who are seeking an integrated enterprise risk management platform.  For more information, please visit www.WheelhouseAdvisors.com or email us at NavigateSuccessfully@WheelhouseAdvisors.com.