Emerging Financial Management

The old practice of compliance Accounting and management thereof has undergone remarkable metamorphosis in recent times in view of severe competition, globalization, price -wars and tough Govt. regulations across the world.

However, managerial focus to stay viable and profitable on a continuous basis defying all hurdles has become so forceful in present times that the entire world of finance and the people who manage finance are devising new ways and means to map continuity , profitability and value addition in business whilst countering risks and uncertainties.

The financial management of to-day is to ensure the company takes right decisions in various crucial matters which are cost effective, most reasonable and entails minimum risk .This, in other words, is accounting for managerial decisions and evaluation thereof. The other requirements being investors' / shareholders' value addition , evaluating the value chain of the business, business continuity mapping, business risk mapping and finding ways and means for their mitigation.

Since most companies are becoming global now, the need for effectively managing international transactions is also an emerging area. This entails currency swaps, interest rate optimization and hedging of currency fluctuations .These in turn needs advance planning, adequate market judgment and financial market analysis. Adequate knowledge of international trade and financing thereof is, thus, called for on the part of a CFO.

As more and more companies are going for mergers & acquisitions, company valuation has emerged as a significant responsibility of a CFO. This entails organizing due diligence, understanding future potentials and assessing intrinsic worth thereof .CFOs in the past were seldom involved in these functions. Further, many mergers/ acquisitions are across the countries, hence, determing the valuation and the evaluation process has to have some kind of uniformity with regard to treatment as well as disclosures of items of income & expenditure and assets & liabilities. This calls for adequate knowledge on the part of CFO, apart from Indian GAAP and the Indian Accounting Standards, of US GAAP or any other GAAP and Accounting Standards thereof, as may be required, for necessary conversion. Moreover, as the concept of fair value accounting is gaining ground, the transition towards IFRS seems inevitable. Thus preparation of Accounts and making the disclosures thereof under IFRS is also an emerging area for a present day CFO. With the formulation of trade guidelines under WTO, the whole gamut of Accounting Policies / Standards will undergo change across the nations, thus, calling for additional responsibilities on the part of a CFO to manage finance and business under a new dimension.

With the emergence of big corporations with huge investments involving many shareholders, managing investors’ expectation and the need for their protection also has become an important function of the CFO in recent times. This entails proper disclosure of financial information as per plethora of Govt. Rules / Regulations to cater to investors right to information.

Finally, as the business has to continue with an expected return on capital invested, the management of the future functionalities and its financial implications has to be articulated as correctly as possible. This entails establishing probabilities and expected values on the key functions of the business and projects the most likely scenario and manages the same with vigor and stamina. This is also an emerging area for the present day CFO.

Contributed By:

Pratap Chakravarty
(Head Finance & Company Secretary)
Jost India Auto Component (P) Limited