Discussion In Many Small Business Organizations Management

Discussion1in Many Small Business Organizations The Management Owner

In many small business organizations, the management (owners who don’t have a dedicated CRO) of the organization mostly make key decisions about business expansion and production. This management has a very good knowledge about designing more products and expanding business but have minimal knowledge about risk mitigation techniques such as inflammation differences, cash flow issues, competitive threats, lawsuits and money management. When a CRO appointed in any organization it helps organization to bring an order in management and structure in ownership. The CRO of organization responsibilities are continuously evolving over the years. CRO functions include identifying risks and plan to mitigate the risk, form good communication between organization key decision making team by conducting meetings and updating risk tolerance level periodically (Kenton, W., 2017).

On coming to Blue Wood Chocolates Company, the CRO should interact with both CEO and CFO, because the company CEO knows everything about business such as past activities and major key decisions which are made previously. Since the CFO is new to organization and he/she is going to be part of future business process CFO should also be in interacted with CRO. The CFO should lead the process at the company while implementing ERM. In the case of Kilgore Custom Milling, the CRO must be interacted with all the team because in this company even the Steve MacLinden is the CEO, each department has their own heads like manufacturing, customer relationship, sales and treasure. So the CRO should conduct common meetings with team to mitigate risk.

In above both organizations there is clear visibility of communication gap among the management, concerns with cash flow, lack of proper risk mitigation plans indicates the mandatory presence of CRO. Since both the companies are small and cannot afford to have a dedicated CRO, it is best advised they should conduct annual risk review about legal, financial and other competitive factors to mitigate risks (Kirkup, D., 2017).

Sample Paper For Above instruction

In the landscape of small business organizations, the role of a Chief Risk Officer (CRO) remains largely unfilled due to resource constraints and the perception that small companies do not face significant risks. However, as market complexities increase and the necessity for structured risk management becomes evident, the integration of CRO functions even in small firms can prove crucial. This paper explores the necessity, roles, and strategic importance of appointing a CRO in small business settings, exemplified by case analyses of Blue Wood Chocolates and Kilgore Custom Milling.

Introduction

Small businesses are vital components of economic growth, yet their management often faces challenges in comprehensive risk mitigation, primarily due to limited resources and expertise. The traditional management approach in such firms usually involves owners or senior managers making pivotal decisions without a dedicated focus on potential risks such as financial instability, legal liabilities, or operational hazards. As the business environment becomes more complex, the importance of a CRO—either as a dedicated role or a functional responsibility—becomes increasingly apparent. The primary goal of integrating a CRO is to develop a structured risk management framework that enhances decision-making, protects assets, and ensures sustained growth.

Case of Blue Wood Chocolates

Blue Wood Chocolates is a privately owned chocolate manufacturing company facing declining profitability and cash flow concerns. The existing management team is knowledgeable in product development and market expansion but lacks expertise in risk mitigation. The appointment of a CRO could serve as a catalyst for developing a comprehensive risk management strategy. The CRO's role would involve engaging with key executives, notably the CEO and the new CFO, to analyze financial stability, competitive threats, and legal risks. The engagement is particularly critical because the CFO’s recent appointment signifies a need for structured financial oversight and risk assessment.

The CRO should facilitate regular meetings with senior management, establish risk appetite levels, and develop risk mitigation policies. For example, cash flow management and credit risk are immediate concerns that require stringent oversight. Moreover, the CRO would oversee the development of risk-related communication channels to foster transparency and proactive risk identification.

Implementing an enterprise risk management (ERM) framework within Blue Wood Chocolates could significantly mitigate risks associated with operational inefficiencies and market fluctuations. Such a framework would include risk identification, assessment, monitoring, and reporting protocols aligned with industry best practices. Although small, the company’s limited financial resources are better utilized by conducting annual risk reviews involving legal, financial, and operational aspects, thereby optimizing risk mitigation efforts without the cost of a full-time CRO.

Case of Kilgore Custom Milling

In contrast, Kilgore Custom Milling involves a broader organizational structure with multiple department heads and a significant international contract with U.S. and Canadian operations. The company faces risks associated with currency volatility, inflation, and international trade regulations. The CEO, Steve MacLinden, and the management team have expressed concerns related to currency risks and cash flows resulting from international sales, especially given their exposure to the U.S. dollar and Canadian dollar fluctuations.

In this context, the appointment of a CRO assumes greater importance. The CRO's primary responsibility is to develop and oversee the implementation of a comprehensive risk management framework. This framework would include currency hedging strategies, such as forward contracts and options, to mitigate foreign exchange risks. The CRO would also serve as a critical intermediary between the management team and the board, ensuring that risk considerations are integrated into strategic planning and operational decisions.

Moreover, the CRO would coordinate with legal and financial advisors to quantify risks, assess their impact, and develop contingency plans. As the company plans to expand its contracts, managing financial risks related to exchange rate movements and inflation will be vital for resiliency. The CRO's role in establishing communication channels across departments and reporting risk metrics to the board would facilitate proactive decision-making and strategic agility.

Discussion of Strategic Benefits

The deployment of CRO functions in small and medium enterprises offers several advantages. First, it creates a dedicated focus on risk, which is especially important in volatile markets or when entering new markets. Second, it provides a structured approach to identify, assess, and manage risks aligned with organizational objectives. Third, it enhances stakeholder confidence by demonstrating proactive risk oversight, which can be advantageous in securing funding or establishing partnerships.

Implementing an ERM framework or appointing a CRO may also help small firms improve internal controls, compliance, and operational efficiency. Furthermore, it fosters a risk-aware culture, prompting employees at all levels to participate in risk identification and mitigation processes. Studies have shown that proactive risk management contributes to organizational resilience, better financial performance, and competitive advantage (Fraser & Simkins, 2016).

Challenges and Recommendations

Despite these benefits, small organizations face hurdles such as resource constraints, limited expertise, and potential resistance to change. Therefore, a phased approach is recommended, beginning with annual risk reviews and gradually integrating formalized risk management practices. Utilizing external consultants, legal advisors, and leveraging existing management expertise can optimize efforts without overwhelming the organization financially.

Additionally, fostering a risk-aware culture through training and communication is critical. Small firms should also prioritize establishing clear risk governance structures, with the CRO or equivalent role functioning as a key member or advisor within the organizational hierarchy. Regular monitoring, reporting, and continuous improvement of risk management practices will ensure longevity and robustness.

Conclusion

In sum, the presence of a CRO or equivalent risk management function in small businesses like Blue Wood Chocolates and Kilgore Custom Milling is vital for navigating complex risks inherent in modern markets. Whether through dedicated appointment or functional responsibilities, proactive risk management enhances organizational resilience, supports strategic growth, and safeguards stakeholder interests. Small businesses must recognize the strategic importance of developing a comprehensive risk management framework tailored to their capacities and market environment. As these case studies illustrate, early and sustained risk oversight can be a decisive factor in the long-term success of small enterprises.

References

• Fraser, J., & Simkins, B. (2016). Enterprise Risk Management: Today's Leading Research and Best Practices for Tomorrow's Executives. Wiley.
• Kenton, W. (2017). Chief Risk Officer (CRO). Investopedia. https://www.investopedia.com/terms/c/ Chief-Risk-Officer-CRO.asp
• Kirkup, D. (2017). Small Business Risk Management Strategies. Journal of Business Management, 12(3), 45-57.
• Sampedro, J. (2019). Developing an Effective Risk Management Framework. Business Risk Review, 8(2), 20-29.
• Shad, M. (2019). The Role of Risk Officers in Modern Business. Risk Management Journal, 15(4), 33-40.
• Yazdani, H. (2019). Employee Engagement in Risk Management. Organizational Psychology Review, 9(1), 76-85.
• OECD. (2019). Small and Medium-Sized Enterprises: Risk Management and Growth. OECD Publishing.
• International Finance Corporation (IFC). (2020). Risk Management for Small and Medium Enterprises. IFC Reports.
• MSCI. (2021). Risk Oversight in Small Firms: Strategies for Success. MSCI Insights.
• Harvard Business Review. (2018). Why Small Businesses Should Prioritize Strategic Risk Management. HBR.org.