Financial directors are playing an increasingly pivotal role in risk management
Chief financial officers (CFOs) are playing an increasingly pivotal role in the risk management of their firm and setting best practice, according to a panel discussion yesterday morning at Aon’s Women in Insurance networking breakfast at the Forum.
In a world driven by financial metrics, key performance indicators are expanding to include a company’s performance in managing risks, in addition to return on investment and cost of capital. Hence CFOs are being increasingly included in the development of strategic risk management processes and solutions rather than solely on the costs involved.
Aon’s ‘crystal ball’, predicting how the insurance and risk industries will evolve, sees CFOs escalating their effectiveness in terms of risk management. The global insurance broker also expects to see more companies appointing chief risk officers (CROs).
This role, working in partnership with the CFO, is helping to elevate risk management to the board and increase the standards of professionalism in handling the risks facing their organisation. CFOs are gleaning insights from their CROs on appropriate stress test scenarios and decision making processes, in particular, around mitigating the risks around investment portfolios and factors affecting cost of capital.
However, Aon’s global risk management survey found that 62% of risk management functions report into a CFO or finance department so over a third of companies could be bypassing this crucial role.
At the session, Christa Davies, CFO of Aon Corporation, commented on her role in relation to risk management: ‘As CFO, my job is to manage risk for our firm and we have put in place solid business practices and a sound global finance team to manage risk holistically across the company. This is so we provide information in an efficient and effective manner to our business heads, and so that we can generate the best return on invested capital for our investors.’
