The ability to identify risks and maintain financial stability is especially important for CFOs now that Brazil is struggling with the worst recession since the 1930s. So said Leonardo Gomes Pereira, chairman of Brazil’s Securities Regulator (CVM), at the CFO Forum organized by the Council of the Americas on April 8, in Rio de Janeiro.
“The CFO is the setter in a volleyball match, preparing the ball for the CEO to attack,” Pereira said. “The court is usually made of sand, but sometimes it’s quicksand, or a glacier, constantly moving beneath our feet.”
Risks are changing along with the business environment. Social media and the speed at which information is disseminated directly affect how business is done. For public companies, for instance, it’s a bigger challenge now to define what should be considered a material fact, and how relevant information should be broadcast.
Some other conditions, such as volatility in foreign exchange and credit markets, pose an even greater risk.
Currency price risks can be mitigated by hedging instruments, but credit risk is harder to determine and difficult to hedge. To make matters worse, small- and medium-sized companies that are not regulated by CVM often resort to creative accounting practices that blur the true financial picture in their balance sheets. CVM is working to reduce gray areas and gaps in regulation but there is still a lot of work to be done, Pereira said.
Brazil is facing an …
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