Risk appetite of a cfo…

Jim has generally been clear about being at the center of a position he has to take. Eg. If it’s a tax optimization strategy, the questions are clear:

1) are we within the bounds of tax code

2) is this something that most companies do - are there precedents

3) what’s the gain from this, a likelihood of litigation and  impact if it is litigated. 

If we are in the center (or close to), wherein the rewards are commensurate with the probability of risk materializing, and we are within the law, it’s a reasonable risk (even if litigated). The answer is not always clear, but general philosophy is to try and seek clarity. 

On numbers for the board, investors and internal…

While planning and projections are critical, what gets communicated depends on the stakeholder. 

For a board plan, you want to show numbers that are a stretch, but attainable. Numbers that show that the leadership is ambitious. Of course they need to be attainable with good execution. Not flawless execution, but really good execution. Boards don’t want to see conservative numbers at all times - else while you hit your numbers and earn their trust, they can also suspect that you are not being ambitious enough. But at the same time, boards don’t want you to miss numbers all the time. It’s a fine balance.

Investors are a different beast. They don’t like stretches. They like predictability. To investors you show a projection that you can hit. That has meaningful risk baked in. 

Internally, transparency is good. So execution leaders know what’s at stake. That they can be part of a winning team, and have good compensation effects if they execute well. And flip side, what they lose if they don’t. 

On importance of planning…

Planning is an important exercise in any company. It is important because it helps align all teams. Aligns teams to unified goals, spending envelopes, and catches disconnects before they become drivers of failure. But for that planning exercise has to be well managed. It should push sales to drive numbers that are a stretch, but reachable; and it should force product teams to deliver. A disconnected planned exercise will fail in alignment exercise and fail in getting confidence of people involved.