An MTI Consulting survey of Chief Financial Officers (CFOs) shows that over 85% of surveyed organizations face working capital challenges. An MTI press release on the results of the survey stated that 80% of CFOs identified receivables management as the key challenge.
Around 42% of CFOs said there is increased collaboration between the finance function and other business divisions in improving the working capital position. Further, over 38% of companies did not have a specific individual or function overlooking working capital management. In fact, the tourism sector has seen the most significant working capital challenge given the high fixed cost structure and the significant decline in the arrival of tourist in the recent past.
The survey uncovered that 4 in every 5 CFOs said it’s necessary to change the current capital structure of the organization given the global economic crisis. However, 66% of CFOs prefer the cheaper option of raising capital by debt. Specifically, this was favoured by regulated organizations such as banks and finance houses. Alternatively, diversified company and those in the manufacturing industry preferred the equity market.
It said although corporate governance is clearly important amongst CFOs, the responsibility is scattered. About a quarter of CFOs believed the Board of Directors were responsible, while 8% of respondents placed importance on corporate governance committees. On the other hand, a chairman is considered only by 4% of interviewees to have any corporate governance bearing. The relevance is that a corporate governance ethic is the basis on which an organization acts and is controlled.
MTI Consulting stated that it is a common misconception that risk management is relevant only to international finance houses. The CFO community in Sri Lanka is equally divided on the need for risk management. MTI advocates that identifying, assessing or minimizing risk whether it be financial, legal, resource oriented or process driven is important. MTI believes that corporate finance approval is key to strategic decisions in order to maintain a laser sharp bottom-line focus. About 50% of the CFO respondents strongly agreed followed by 36% who somewhat agreed.