Why financial resilience is a must

Dubai - Companies must plan well amidst uncertainties - and CFOs are to play a key role

Rising volatility and increasing uncertainty in global markets have created a business environment where companies need to act immediately towards building their financial resilience, top officials from the Institute of Chartered Accountants of India, or Icai, have said.
The event's chief guest was Shaikh Nahyan bin Mubarak Al Nahyan, Cabinet Member and UAE Minister of Culture and Knowledge Development.
Speaking in an interview at the Icai's 34th annual conference in Dubai, Prasanna Chandra, director of the Centre for Financial Management, said that financial resilience will become increasingly important in the coming years, because of increasing financial distress.
"There is rising volatility and uncertainty, and organisations will have to navigate through this problem, and chief financial officers will have a larger role to play. The role has certainly evolved over the years, as companies today have gone global. In addition, risk has increased, business models have developed, and competition has also intensified worldwide," he said.
In his presentation, Chandra highlighted how companies can today build on their financial stability. Certain areas, he said, need to be focused on such as strategy and business model; capital allocation; strategic finance; performance management; cost management; corporate risk management; mergers, acquisitions and restructuring; and corporate governance.
"Companies will have to work harder in these areas to build financial resilience," he stressed.
Chandra also spoke in length on Warren Buffett, and used the American business magnate as an example of a business leader successfully running a business that continues to generate revenues.
"Much of Warren Buffett's success at Berkshire Hathaway can be attributed to how he leads the company. Over the years, he has hired several talented individuals to whom he has given complete operational autonomy. He also makes it a point to make them feel valued by congratulating them on their successes," Chandra noted.
Another speaker at the event, T. N. Manoharan, chairman of Canara Bank and past president of the Icai, revealed that global economic leaders have described the global economy as being at a crossroads, because there has never been a time of greater promise or greater peril.
"These global opinion makers have to be taken very seriously. Change is the order of the day, and change might seem incomprehensible until it actually happens," he said. Manoharan also listed the top five challenges facing the global economy today, which include a divergence in monetary policies among major economies; a buildup of sovereign and corporate debt; Britain debating on leaving the EU in the coming months; slumping oil prices; and climate change.
"The US Fed have started raising rates whereas other countries are reducing them," he said. "In addition, emerging economies have integrated in the global economy to an unprecedented degree. What challenge affects one nation will ultimately affect the others; so, there needs to be a focus on what is good for the global economy as a whole and nations should work towards this."
"The biggest change over the past 35 years is the growth of Asia," he added. "The contribution of countries to the global GDP like China, Japan and India has increased over the years. In recent years though, Chinese GDP has slumped and the focus has shifted to startups in India and the ease of doing business in the country, as well as government initiatives to welcome greater foreign direct investment. I am confident that the world global economy is going to come out stronger from these challenges times as these issues are addressed."
M. Devaraja Reddy, president of the Icai, noted that the key to success for companies today lies in successfully adapting to the changes in the global economy.
"Business has become a global village today. A lot of big global companies are investing heavily in projects around the world and more and more emphasis will be placed on quality information in the coming years. Companies need to build financial resilience and they should do so as soon as possible unless they want to become outdated," he stressed.
- rohma@khaleejtimes.com