Nudging the CFO

Can you make a difference with measurement if the culture of your organisation is one that does not respect, let alone crave data? In my experience it is tough to go hard against the grain of an organisation’s culture. The better way is to nudge it.

How might you nudge it? Culture change can start from outside the executive team but ultimately it has to be adopted by a key executive and then the whole executive. So no better place to start than with the strategic risks of your organisation.

How do you start? One way is to approach the CFO and ask them how they view the strategic risk profile of the organisation affecting decisions about the balance sheet. That is, how much capital is being tied up because of the burden of risk. The burden that falls upon decision makers that leads them to hold something in reserve in case things don’t turn out as planned.

The next question to ask is what would it mean to the CFO if they had more certainty about the financial risk of the strategic risk profile. If capital could potentially be freed up. Or if they could explain with more evidence to the executive and the board why their advice is to hold a certain level of reserves.

If the answers are positive, then together choose one of the organisation’s strategic risks that has uncertain financial impact that the CFO would like to be more certain about and start Escaping the Matrix!; my blog about using statistical methods to better understand risks subjectively placed on the risk matrix.

An example for an airline like Qantas or Virgin before COVID would be the risk of a new entrant into the profitable domestic market. On the face of it, hard to estimate. However, there is data you could seek out. How many airlines in the world have the financial capacity, the fleet capacity (or more likely over capacity), the trend in regulation of the industry. Once things are in a new normal for the airline industry, they will have plenty of data about financial shocks and different strategies with which to respond!

So go give your CFO a nudge with something that really speaks to them.

Stay safe and adapt – with better measurement!