What is Corporate Financial Wellness?

Employee financial wellness is quickly climbing the ladder of top concerns for global businesses. The implications of individual financial wellbeing have been revealed as major factors in organizational success: money-related stress impacts retention, productivity, performance, and more, costing companies a collective $300 billion each year. And more and more solutions are being introduced that seek to mitigate this growing problem.

But concepts we’ve explored in-depth regarding personal financial wellness can also be applied at the organizational level. Understanding corporate financial wellness can help company leaders and financial strategists build better monetary foundations for their business, allowing them to easily navigate the economic uncertainty of the future.

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What is financial wellness?

The term ‘financial wellness’ generally describes a state of financial stability and security which allows an individual, group, or organization a higher degree of financial control and flexibility. 

This means that the obligatory expenses of the day-to-day are comfortably covered, unexpected expenses are easily absorbed or addressed, and the surplus is available for strategic use either for continued financial strengthening, or perpetuation towards a stated goal.

Personal vs. corporate financial wellness

There are myriad similarities between personal and corporate financial wellness. Elements such as debt, earnings, emergency funds, insurance, and financial strategy are equally relevant in both fields, however their application, as well as the objectives they are supporting, remain distinctive.

Qualities of personal financial wellness include:

• An individual focus: Personal financial wellness centers around the financial health of an individual or a household. The scope of personal financial wellness rarely extends beyond an individual’s dependents, although cultivating personal financial wellness can help to provide familial financial stability for generations.

• Life goals and values: The experience of personal financial wellness is highly dependent upon an individual’s life goals, values, and financial behaviors. Financial wellbeing can be cultivated at most income levels as long as the individual is living within their means, budgeting well, making adequate savings contributions, and being paid justly for their labor

• Income and expenses: Personal financial wellness is largely about creating a balance between income and expenses. In the day to day this means creating and sticking to a healthy budget. Over the long term, this will involve saving for emergencies, saving for retirement, and strategic interaction with debt.

• Financial education: Understanding how to make strategic use of finances is half the task of cultivating financial wellness. Individuals starting their journey will want to garner better financial literacy to help them make informed monetary decisions.

Qualities of corporate financial wellness include:

• Organizational focus: Corporate financial wellness describes the financial health of a business entity. Concepts of personal financial wellness are modified and scaled to support a company’s profitability and sustainability.

• Business goals and objectives: Corporate financial wellness is also dependent on the goals and values of the entity in question, however these are often market and industry-driven, and with the interests of business sustainability and stakeholder benefit in mind.

• Revenue and costs: This is an income-to-expenditure consideration at scale. Organizations cultivating corporate financial wellness bust also consider their holistic revenue vs. anticipated as well as unanticipated expenses. Businesses make use of budgets to control and strategize spending, save for emergencies and towards goals, and take on various types of insurance to help mitigate the impact of any financial emergencies.

• Stakeholder relations: Decision making regarding corporate financial wellness is rarely an individual executive call. Financial resources are drawn from a variety of different entities, and companies have to maintain transparency with these sources in all stages in order to maintain investor as well as customer interest. Likewise, the ROI of many benefit programs can have a significant impact on corporate financial health, and so employee opinion and need must be taken into account when making expensive decisions regarding internal programming.

• Regulatory compliance: Perhaps the greatest distinguishing factor between personal and corporate financial wellness: organizations are subject to a number of regulatory factors with which they must comply in order to be allowed to continue operating. Failure to adhere to any number of compliance mandates, from operating standards to reporting, can result in fines, investigations, or other actions which may hurt a business’s revenue.

How to support corporate financial wellness

As with personal financial wellness, corporate financial wellbeing is dependent on the goals of the organization. Maintaining long-term financial wellness then means aligning an organization’s financial strategy with the overall strategy of the company. Setting organizational objectives will help to define and strategize the following financial objectives, and drive the way in which company money is spent, saved, or invested.

A corporate financial strategy is also likely to overlap with your human strategy in the long run. Maintaining financial stability and security involves much higher stakes when said entity is responsible for the livelihoods of potentially thousands of individuals. This means that, on top of the considerations listed above, strategizing your financial team is a critical factor to organizational health.

Forbes council member Travis Foreman holds a solid succession plan as one key component to any organization’s financial wellbeing: 

“In some cases, especially with small businesses, one or two individuals may be essential to the operations and continuation of the firm. In this case, the company’s financial well-being requires a corporate succession plan.”

The flow of personnel can be an expensive undertaking, especially in key positions. Lining individuals up to take over critical operations is one form of insurance in which businesses can invest to keep things running smoothly.

What’s next?

Investing in employee financial wellness is one more way you can contribute to the wellbeing of your company overall. Origin Financial is an employee financial wellness solution that helps to cultivate holistic employee financial wellness with a strategically-aligned combination of educational resources, expert advice, and tooling.

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