Welcoming Old Fashioned Risk Analysis

UPA Politicians and the corporate CFOs will attempt to defend, but the widely believed truth is that they are to a large extent held responsible for the bad state of the economy of the country.  CFOs raised money in the decade of 2000-2010 for businesses at huge valuations with little to support by way of cash flows. Large investments were made with little risk analysis in to unknown areas like Power and Infrastructure by private sector where resources were over leveraged leaving little room sustainability in lean period.

No wonder when the tide turned low, overleveraged business valuation did bungee jumping with no strings attached.  Business cash flows were unable to cover interest on borrowings, let alone servicing principle.  Of course, lots of it was due to broken promises by Government and subsequent decision making paralysis but CFOs also faltered in their prime role of being conscious keeper for the businesses and fueled this mad rush for growth by arranging money
without proper risk and due diligence of matching cash flows.

"CFOs have to re-define the core business and actively help it  from exiting business, which are not core or drain on the resources"

Now the time has come for CFOs and their teams to undo and get the businesses out of its present mess.  Areas where CFOs have to play role with the senior management is to re-define the core business and actively help it  from exiting business, which are not core or drain on the resources. With the CEO, he has to bring the focus back on sustaining business cash flows, reducing leverage to an affordable level and recapitalize the business if desired. Old fashioned
Risk Analysis has to come back with hoards of available data and information, reengineered in to running the business efficiently with proper monitoring. Other major areas where the CFOs team can effectively play role is the cost management where information technology can contribute by way of providing information flow, as well as, effective means to cut down communication and monitoring cost.

Interest cost, which is running very high due to high inflation, eats into the operating margins of the company if not handled properly.  Again IT can help them to reduce working capital cycle by providing critical information or participating in collection and inventory control modules.  Overall opportunities for a CFO are endless to influence decision making on the simple principle
“Cash is King “ and profit making is essential to sustain business.