The Balancing Act of Mitigating Financial Risk While Retaining Talent

Risk is?simply?defined as?“a situation involving exposure to unknown and known events.”?To?mitigate?known fiscal?risk in?any business or organization, it is incumbent upon?the Finance?team to?consistently look at the ever-changing and evolving picture, plus?the long game. That?major bullet point of the CFO’s job description?is a daily?balancing act?– one that can feel like a game of Jenga - to?put blocks of standard operating procedures and effective planning in place coupled with a strong, engaged team.?Over my career, I?have?sought?to?maintain?this?direct link between risk management and talent retention.???

Risk -- small word,?potential?large impact??

If you are in a?Chief Financial Officer?(CFO)?role?or the like, your?major?responsibilities?will?include?linking the?organization's?Strategic Plan with?financial performance,?plus the?prioritization of?operational safety's impact on the organization and?the?negotiation of an?insurance portfolio.?Lacking?capacity??Consider?transferring?fiscal and legal consequences to another party?for items?running?the gamut from insurance?and?outsourcing?to subcontracting?and contract indemnification.??

There are several integral steps in delineating your?Enterprise Risk Management (ERM)?process?– and you cannot?do?it alone?as a Finance team. The ERM?must bring in the unique?expertise?of?Operations, Compliance and Programs?staff, plus?insights?into the appetite?for risk must?be garnered?from?the Executive?team and Board.?As a CFO, I start with understanding the layers of the business model, along with engaging in conversations with key stakeholders. I then identify drivers that are sensitive to economic conditions,?complemented?by?my?explaining?how I have prioritized?resource?allocation to reduce risk.??

My toolkit for prioritizing risk, honed over my career in the field, includes: performance and gap analysis to identify areas that?impact?internal?controls; insurance review to determine if caps will?suffice?in worst-case scenarios; incident report review, conducted periodically to look at all incidents and identify patterns;?and audits, which serve as internal and external?indicators?of the?trends?and probability of risk.???

Once there is an agreed-upon level of risk acceptable to the organization, you must?identify?each?area?of risk and grade from?low probability?up to?high impact?what can?be mitigated?via what strategies.?Take as an?example?cyber insurance, with an increase of hackings for?ransom?a reality with which we must all deal.?Is such a financial attack?deemed?low risk? Medium risk??High risk? Once that determination is made,?allocate?time to review ERM results and focus more on implementing solutions that focus on avoiding,?transferring,?accepting?or reducing?known?risk.??

In a nutshell, it comes down to partnering with insurance brokers, negotiating?insurance premiums and insurance package limits, and?working collectively.?The?latter demands a strong internal Finance team?that will work?across the organization?to alert and help divisions to make decisions that will?reduce?the?risk.???

Talent-retention strategy??

Institutional knowledge loss creates challenges. As they say, “those who forget history are doomed to repeat it.” Maintaining?a strong?Finance?team?is paramount?to successfully mitigating financial?risk.??

During onboarding, I always make sure that a new?employee?is aligned with LIIF's mission that?"everybody in the United States should benefit from?living in a community of opportunity, equity and well-being.”?Taking the time to remind the team?of our mission?always grounds us, especially during work challenges.?Remembering?that we are all here for the same reason helps move us forward.??

It is imperative to keep your staff valued and engaged in their work.?While industry-best compensation and benefits packages are the start, there is so much more managers can, and should, do.?One way is to create clear career pathways in the organization, ensuring internal promotions?for?open positions?are explored?before?seeking external?candidates.?Transparency is key, and innovative ideas should include items such as offering an opportunity to shadow leaders.??

We all want clear expectations, which is why it is incumbent upon Finance team leaders to define yearly key performance indicators (KPIs) and, via hands-on partnering with other departments, define objectives and key results (OKRs). This collectively defines the path to where the organization needs to be.?Consistent check-ins determining where the team member is?regarding?these KPIs help?identify?any challenges they are experiencing, with?potential?support needed being?identified.?Your performance reviews should be kept simple, but concrete. The right goal-setting framework is based upon the organizational structures, which translate strategy into execution. Organizational health is tied to staff’s perception of how well the nonprofit delivers impact. OKRs help organizations?lay a solid foundation for a larger strategy transformation, with people at its core.?

Autonomy is my priority?as I create a team that is strong and resilient. If the team can drive changes and make decisions as they see fit, then they?feel?trusted, thereby increasing their engagement with the organization and its mission.???

Team retreats, which I conduct?quarterly,?also work well in creating alignment and refining any areas needing a reboot. Seek team feedback on the agenda?and keep topics streamlined to allow for in-depth discourse.??

Through it all,?communication?is?the?key.??

Conclusion??

Mitigating risk is a major responsibility of?any?Finance team, but it need not be a?daunting task.?Having?standard operating procedures?in place creates consistency year by year, keeping your organization in a financially sound position with effective collaboration and communication. Add a successful talent-retention strategy and?you will ensure your success as the leader of a?Finance team.?