Lastly among the key financial leadership tasks is risk management: establishing internal controls to enhance business efficiency and mitigate situations where employees abuse their authority, whether intentionally or inadvertently. This includes the classic understanding of the control environment outlined in manuals for international financial reporting standards: corporate-level controls, information system controls (or IT controls), as well as financial controls.
Together, these delineated blocks constitute a complex network of interconnected elements of financial management. Ensuring proper process configuration, facilitating information exchanges, synchronizing participant actions, and implementing timely and adequate automation – these are all hallmarks of competent financial management and serve as essential prerequisites for the development of any business, whether they are commercial or non-commercial ventures.
In practice, the financial function seldom evolves at a pace commensurate with business growth. Typically, management and corresponding process development struggle to keep pace with core production process expansion. This discrepancy is not due to a lack of motivation on the part of financial leaders but rather stems from the residual resource allocation principle. However, this phenomenon extends beyond finances and applies to all service (non-core) functions for businesses. Nonetheless, neglecting the aforementioned aspects, whether deliberately or due to lack of knowledge, underinvestment in infrastructure, process construction and automation, as well as in financial department resources, significantly heightens business risks, often culminating in bankruptcies.
Chapter 1
Finance in Company Management
The position of Chief Financial Officer (CFO) differs fundamentally from that of their counterparts in company management. The CFO primarily serves the shareholders and only secondarily the CEO. While this principle is universally accepted in modern business and international law, it may not always be intuitively clear to CFOs themselves or their immediate superiors.
However, it’s essential to understand that the CFO is not in opposition to the CEO and the management team; rather, they are an integral part of it. Nevertheless, what sets them apart from other leaders is their role as internal skeptics and sparring partners in strategy discussions. Additionally, the primary focus of the financial leader and their teams is to provide accurate information to all stakeholders within and outside the company for decisionmaking and risk management purposes.