Strategically Managing Cash and Financial Risk - Myth or Reality?

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Overview: With the recent spate of high profile corporate failures and the increasing volatility in financial markets, strategically managing cash and financial risk is firmly on boardroom agendas. However, it is difficult to achieve effective strategic cash and financial risk management in practice, following the introduction of very prescriptive accounting standards. In many respects, these accounting standards appear to be driving decision-making and, in circumstances where this is not the case, significant process inefficiency has resulted. This article aims to introduce a practical and real world solution for taking strategic control whilst ensuring significant straight through processing. So what is needed to optimise management of cash and financial risk? First, a management process needs to be set up that links an awareness of risk with corporate governance, risk identification, decision-making, external reporting and compensation. Secondly, people and systems must be put in place to deliver the information upon which managers can base their decisions. Thirdly, a regular and objective assessment of the company's own internal financial risk management framework and performance must be conducted. Finally, the cash cycle needs to be connected provide the linkage between each stage in the underlying flow lifecycle to enable continual learning and understanding.

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Format: HTML | Date: Sep 2002 | Pages: 1