Pursue shareholder value: The primary goal for a company is to increase the wealth of its shareholders by paying dividends and/or causing the stock price to increase. Shareholders money should be used to earn a higher return than they could earn themselves by investing in other assets having the same amount of risk. The CFO should first and foremost consider the interests of shareholders in its business decisions. Shareholder value is difficult to influence directly. The CFO should partner with other managers of the company and evaluate individual drivers. Short term profit maximization doesnt necessarily increase shareholder value. For example, if a business sells sub-standard products to reduce cost and make a quick profit, it damages its reputation and therefore destroys competitive advantage in the future. The same holds true for businesses that neglect research or investment in motivated and well-trained employees.
Understand and mitigate risk: It is necessary to mitigate risk in order to achieve the greatest degree of success. The CFO is responsible for having “sufficiently in-depth knowledge of company systems to ferret out any risk occurring in a verity of areas.” While the process to mitigate risk will vary somewhat from one situation to another, proper risk mitigation calls for understanding what you currently have and what needs to be done in order to minimize, monitor, and control the probability and/or impact of adverse events. The focus on risk should include areas such as loss of key customers or suppliers, loss of brand image, project design errors, commodity price changes, pollution, foreign exchange risk, adverse regulatory changes, contract failures, system failures, succession failures, employee practices, investment losses, and interest rate increases. Once the CFO has identified accessed and prioritized risks strategies can be used to manage the risks. Some strategies include transferring the risk to another party, avoiding the risk, reducing the negative effect of the risk, and accepting some or all of the consequences of a particular risk. Another approach is to evaluate the amount and type of insurance coverage that is maintained. Having the proper amount of insurance protection is one of the most important ways to mitigate risk and help to keep on solid financial ground. The right type of insurance will provide resources.
Link performance measures to strategy: The purpose behind performance measures is to improve performance. Strategic performance measures monitor the implementation and effectiveness of an organizations strategies, determine the gap between actual and targeted performance and determine organization