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The CFO's Role in Managing General-Liability and Management-Liability Risks

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One of the most important duties of the Chief Financial Officer is managing company risk, and two key categories of risk that the CFO must manage are general liability and management liability. For general-liability risks, the list includes lawsuits and claims for physical injuries or illnesses to non-employees, property damage caused by the company’s products or operations, and non-physical injury, such as libel or copyright infringement. Under the management liability umbrella, the list of risks includes wrongdoing or mismanagement by the company and its managers, directors, or officers. Examples include sexual harassment, wrongful termination, discrimination, or failure in a fiduciary duty.

For CFOs, the stakes are high, because the financial damage caused by lawsuits can threaten the survival of a small or medium-sized company. The CFO has to identify, avoid, and mitigate exposure to risks while protecting the value of the enterprise. As a recent survey shows, CFOs need to take a much more active role in managing general-liability and management-liability risks. That should include maintaining proper types and levels of insurance, and seeking counsel from qualified insurance brokers when necessary.

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