The CFO’s Information Challenge in Managing Macroeconomic Risk

25 Pages Posted: 24 Aug 2010 Last revised: 28 Jan 2013

See all articles by Lars Oxelheim

Lars Oxelheim

Research Institute of Industrial Economics (IFN); University of Agder; Knut Wicksell Center for Financial Studies, Lund University

Clas Wihlborg

Chapman University; University West

Marcus Thorsheim

Lund University - Lund Institute of Economic Research

Date Written: August 19, 2010

Abstract

In this paper we examine the role of the CFO in setting risk management strategy with respect to macroeconomic risk, in particular, and we consider the information requirements for setting a strategy that is consistent with corporate objectives. We argue that macroeconomic risk management requires a broad approach encompassing financial, operational and strategic considerations. Furthermore, several interdependent sources of risk in the macroeconomic environment must be taken into account. Once this interdependence among, for example, exchange rates, interest rates and inflation are taken into account macroeconomic risk management can be considered a relatively self-contained aspect of Integrated Risk Management (IRM) provided relevant information is available to management. Financial risk management cannot be considered a self-contained part of macroeconomic risk management, however, since value increasing investments in flexibility of business operations affect corporate exposure and make it uncertain.

Keywords: Risk Management Strategy, Macroeconomic Risk, Integrated Risk Management, Chief Financial Officer, Information Needs, Corporate Strategy, Financial Risk, Real Options

JEL Classification: F23, G01, G32, G34, M21

Suggested Citation

Oxelheim, Lars and Wihlborg, Clas and Thorsheim, Marcus, The CFO’s Information Challenge in Managing Macroeconomic Risk (August 19, 2010). IFN Working Paper No. 847, Available at SSRN: https://ssrn.com/abstract=1663398 or http://dx.doi.org/10.2139/ssrn.1663398

Lars Oxelheim (Contact Author)

Research Institute of Industrial Economics (IFN) ( email )

P.O. Box 55665
SE-10215 Stockholm
Sweden
+46 8 665 4527 (Phone)
+46 8 665 4599 (Fax)

University of Agder ( email )

Serviceboks 422
N-4604 Kristiansand, VEST AGDER 4604
Norway

Knut Wicksell Center for Financial Studies, Lund University ( email )

P.O.Box 7080
S-220 07 Lund
Sweden
+46462228744 (Phone)

Clas Wihlborg

Chapman University ( email )

333 N. Glassell
Orange, CA 92866
United States
+17147447630 (Phone)

University West ( email )

Trollhättan, 46186
Sweden

Marcus Thorsheim

Lund University - Lund Institute of Economic Research ( email )

P O Box 7080
SE-220 07 LUND
Sweden

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