s.png)
Risk Management
Management takes action based on available information. But when is information sufficient?
Our Digital CFO Services include the feature "Risk Management" . This proactively informs the management on key business and performance areas, effectively controlling them.
The deliverables are periodic reports on key indicators used as alerts and warning signs for the periods to come.
We may report on a daily, weekly, monthly, quarterly or annual basis. This depends on the critical level of the financials and on the value needs.
1
Assess critical areas and alert levels
We start our risk management from assessing the critical areas to focus on. What are the industry standards and critical areas? What has been the areas that should be closely monitored?
Coming to company specific analysis, we review the financial and the operational performance of the company. We are looking for areas that are either at a critical level, or they are crucial for the company's success, which we will name as key profitabilty drivers.
We always share our insights with local management teams. We want to know what they think about our findings, what kind of problems and obstacles have they encountered so far. From our perspective controlling is a team building task.
2
Selection and measurement
The next step is to select the key areas that we need to focus. We share our insights with local management and we validate the impact of these risk factors to the profitability of the company. These risk factors might be both financial as well as non financial. We will call them key profitability indicators (KPIs).
After agreeing on the key areas to monitor, we set the levels that should be attainable. The level of each key area is defined in three risk levels:
-
Green, within safe zone
-
Orange, approaches critical levels or tends to
-
Red, key profitabilty indicator is at critical levels, action must be taken in avoiding default.
In every case that we have an orange critical level indicator, we present to the management the situation. We explain why we consider this as being near critical risk situation and depict a scenario analysis. Furthermore, we find the root of the problem, suggesting alternatives that minimize the risk.
​
3
Reporting process of key profitability indicators (KPI)
The next step is to deliver this crucial information to the management of the company.
-
When shall we report KPIs? Depending on the company's resources, the level of KPIs and their nature we will suggest the periodically of the reports.
-
What shall we report? We suggest to the company to select and report only the most relevant KPIs. We avoid reporting too much information because it might be easy to loose focus.
-
What should you expect to receive? We hand in the KPIs with the most usable format. Spreadsheets, database reports, PDFs, presentation material or word documents. We use the most effective tool, provided that includes all relevant information and is easy to read, understand and interpret.
-
How will you receive it? We use digital technology throughout our work. Also to be environmentally friendly we avoid printouts, and we suggest so to our customers. In most cases we deliver a tablet with preinstalled alll necessary applications and the necessary links to our in house web applications.
4
View the profitability indicators wherever you are
Implementing technology and digital accounting in our work has many advantages. One key point is that you may overview the course of your company wherever you are. You might be at your office, but you may also be at your house, or waiting for your children while they are attending an activity. If you have internet connection, then you have updates on your company key profitability indicators.
This process is an evolving procedure. In many cases we have noticed that we may start with a set of 5 KPIs, but later on we might add another 3 and deduct 1 from the initial list. As companies grow and evolve so do the KPIs you need to watch.