Discuss about the Leadership Strategies for Corporate Financial.
For this research paper, I would like to select ‘Nick Scali Limited’ (NCK) as a research company. NCK is an ASX listed Australian company that was established in 1962 by Nick D. Scali. The firm retails as well as imports furniture such as: lounges, chairs, coffee tables, dining tables, and entertainment units (Nick Scali. 2016). Along with this, NCK mainly focuses on leather and fabric lounges. It imports approx 4,000 containers of furniture per year in all over the world. NCK has distribution centers all across Australia. Moreover, Sofas2Go, Nick Scali Online, and Nick Scali branded are the major brands of NCK. Anthony J. Scali is the CEO (Chief Executive Officer) of the firm. Kevin Fine is the CFO (Chief Financial Officer) of ‘Nick Scali Limited.’ On the other hand, the main purpose of this research paper is to describe the general areas of responsibility for the CFO of the firm.
The chief financial officer is an important person that plays a significant role to manage and control the financial activities of the organization. Kevin Fine is the CFO of NCK who performs numerous responsibilities to accomplish the financial goals and objectives of the business in an effective and a more comprehensive manner (Moeller, 2007). In addition to this, the three general areas of responsibility for the chief financial officer of the firm are described as below:
Financial Planning: The CFO of NCK is responsible to perform financial planning for the growth and success of the organization. For case, the CFO Kevin Fine makes effective financial plans to achieve the financial goals of the business in a pre-determined time period. Along with this, with the help of these financial plans, business organization can use its available funds as well as resources in an appropriate way. The CFO is also responsible to monitor and control the cash flow of the business effectively (Kasunic and Kasunic, 2009). In addition to this, Kevin Fine has close eyes on all the financial transactions. It is essential to improve the transparency of the firm. Moreover, the chief financial officer is responsible to make effective financial plans to raise the capital of the firm. For case, it should be noted down that, the CFO of NCK develops and executes numerous effective financial plans and provisions that are required to raise the capital of the business.
In addition to this, the CFO of the firm is responsible to evaluate the financial requirements and also develop long term financial plans to fulfill the financial needs of the business in an effective and an appropriate manner. The CFO also develops alternative options that play a major role to fulfill the financial necessities of the firm in a timely manner. Along with this, Kevin Fine also pays the taxes and dues of the business in order to improve the financial performance of the organization (Bragg, 2012). Moreover, the CFO also develops effective accounting policies and procedures for procuring, credit, payment, collections, and all the financial obligations that are related to the business. For that reason, it can be said that, the chief financial officer of ‘Nick Scali’ is responsible to do effective financial planning and to manage all the financial activities of the business in an effective and an appropriate manner.
Mitigate Financial Risk: The chief financial officer of an organization plays a significant role to reduce the financial risks of the business. The CFO of NCK is fully responsible to identify the financial risks that may take place in the financial areas of the organization. Along with this, the chief financial officer of NCK has in-depth knowledge of the accounting information systems that are used by the firm to manage and control all the financial activities of the business (Hitt, Ireland and Hoskisson, 2006). On the other hand, the chief financial officer controls numerous types of risks that may affect the financial performance of the business in a negative way. For case, the CFO is responsible to mitigate the risk that is linked to loss of business associates. The CFO arranges different sources of supply chain to satisfy the needs of its business partners and customers in an effective way. Along with this, the CFO is also responsible to mitigate risk that is related to the brand image of the firm. The chief financial officer develops effective strategies and also focuses its attention on strong management & brand quality to improve the brand image of the business (Dergel, 2014).
In addition to this, the CFO of the firm develops risk mitigation strategies to mitigate financial risks of the business in an effective and a more comprehensive manner. For case, the chief financial officer creates risk mitigate strategy to mitigate the financial risk that is linked to the changes of commodity prices. For case, to reduce this type of risk, the CFO develops long-term fixed price contracts. The CFO also takes help of cost cutting methods in order to maintain the commodity prices’ changes in an effective way (Ferguson, 2006). Along with this, the CFO of firm also develops risk mitigation strategy to alleviate foreign exchange risk. The chief financial officer decides the level of foreign trade, discovers the probable losses and also executes hedging strategies to mitigate foreign exchange risk. Moreover, the CFO of firm also develops risk mitigation strategy to alleviate the risks that are linked to the contract failures. The CFO confirms all the contracts to fulfill their terms and conditions in order to mitigate the contract failures’ risk in an appropriate way (Fabozzi, Drake and Polimeni, 2008). For that reason, it can be said that, the CFO of the firm is fully responsible to comprehend & mitigate financial risks to improve the financial performance and to accomplish financial goals of the business.
Financial Functions: The chief financial officer of NCK is responsible to develop accounting/financial functions for the financial growth of the organization. This is a major area of responsibility for the CFO of the firm. It is because of with the help of effective financial functions, the CFO becomes able to make effective financial plans to improve the financial performance of the business (Oakes and Galagan, 2011). On the other hand, accounting/financial functions are also helpful to develop risk mitigation strategies to reduce financial risks in an effective and an appropriate manner. The CFO of NCK also develops accounting/financial functions to improve the financial performance of the firm. Moreover, the CEO also implements an ongoing system of improvements to make corrections in the accounting/financial functions if there is something wrong and inappropriate. Along with this, the chief financial officer becomes familiar with the business models of the firm. This is essential to create value and to do all the accounting & financial functions in an accurate way (Bragg, 2011).
In addition to this, the CFO is responsible to improve both expected and real financial performance of the business. Moreover, the CFO adopts and implements different financial methods such as: ration analysis, balanced scorecard, etc. to improve both financial performance of the firm. The CFO also plays a critical role in order to establish a strong communications between shareholders, financial analysts and investment bankers of the firm (Schneider and Scanlon, 2011). Along with this, there are numerous inherent goals behind the development of accounting/financial functions. For case, with the help of these functions, the CFO controls the staff of the firm. The CFO also develops different policies and procedures; so that the employees can perform all the accounting/financial functions in an accurate way. The CFO is also responsible to maintain the accuracy of the financial data and information. Moreover, the CFO aligns the employees into team; so they may perform accounting/financial functions to improve overall performance of the business (Cannon, Bergmann and Pamplin, 2006). In this way, it can be said that, the CFO of NCK is responsible to develop accounting/financial functions for the financial growth of the organization.
The responsibilities of the chief financial officer have an effect on the ultimate objective of the business. An organization works to accomplish its goals and objectives in a specified time period. Moreover, the firm is liable to manage & control its funds and financial activities to achieve the business objectives effectively. In this situation, the CFO of the firm controls and manages all the financial activities. The CFO also uses the available resources to raise the capital of the firm. The financial growth of the firm is directly linked to the business objectives of the organization. In this situation, the firm becomes able to achieve ultimate objective of the company (Lapovsky and McKeown-Moak, 2010). For that reason, it can be said that, the responsibilities performed by the CFO influence ultimate objective of the company in a positive way.
Conclusion
On the basis of the above discussion, it can be said that, the CFO is an important person that works for the financial growth and success of the organizations. The CFO performs numerous important duties and responsibilities to accomplish the financial, competitive, and business goals of the firm.
The EMH (Efficient-Market Hypothesis) is an important investment theory that was developed by Professor Eugene Fama. The EMH theory is useful for investors in order to make investment decision to gain higher returns. Along with this, the EMH theory affirms that, in a liquid market, security prices completely reflect all the available financial information of the business organizations. Moreover, the EMH subsists in different degrees such as: strong, semi-strong, and weak. These different degrees of EMH theory address the enclosure of non-public information in market prices (Lee, Lee and Lee, 2009). In addition to this, the EMH theory states that stocks always deal at their fair value so; investors are unable to purchase undervalued stocks and also trade stocks for inflated prices. In this way, the EMH theory tells that it is unfeasible to beat the market because of stock market efficiency reveal all the relevant financial information of the organizations.
On the other hand, the EMH theory plays a significant role to select a portfolio to obtain higher profits at lower risk. But, the pension fund manager might not pick a portfolio with a pin if the EMH is true. There are numerous reasons behind this. For case, the major reason is that a portfolio with a pin will not work in the favor of the investors if it involves higher degree of risk. Moreover, a portfolio with a pin would not be able to provide higher degree of customer satisfaction. The pension fund manager might choose a portfolio with a pin if the EMH is true and stocks are well diversified (Brealey, Myers, Allen and Mohanty, 2012). Along with this, the EMH does not mean to pick a portfolio with a pin. The fund manager should not consider the EMH to select a portfolio. The main reason behind it is that a large number of stocks are not well diversified in the market. In that case, the fund manager must pick only a well-diversified portfolio to increase profits and to mitigate risk in an appropriate manner.
Apart from this, the EMH theory does not describe that selection of portfolio must be done with a pin. There are numerous important rules that the pension fund manager should follow to select a portfolio effectively. The first rule states that a well-diversified portfolio is appropriate to get higher return on a portfolio. Moreover, the second rule affirms that the investor must ensure the level of risk before the selection of portfolio. The third rule explains that the select portfolio should be able to provide tax benefits to the investors (Graham and Dodd, 2008). Hence, the fund manager should focus on these rules to select a portfolio with a pin. The efficient-market hypothesis is unable to choose an appropriate portfolio to the investors. It is because of it may increase the level of risk and also diminish the level of profits. A portfolio with a pin would not be proficient to satisfy the customers. For this reason, the pension fund manager might not select a portfolio only on the basis of the effective market hypothesis.
References
Bragg, S.M. (2011). The New CFO Financial Leadership Manual. UK: John Wiley & Sons.
Bragg, S.M. (2012). Accounting Policies and Procedures Manual: A Blueprint for Running an Effective and Efficient Department. Australia: John Wiley & Sons.
Brealey, R.A., Myers, S.C., Allen, F. and Mohanty, P. (2012). Principles of Corporate Finance. NY: Tata McGraw-Hill Companies Inc.
Cannon, D.L., Bergmann, T. S. and Pamplin, B. (2006). CISA Certified Information Systems Auditor Study Guide. UK: John Wiley & Sons.
Dergel, S. (2014). Guide to CFO Success: Leadership Strategies for Corporate Financial Professionals. USA: John Wiley & Sons.
Fabozzi, F.J., Drake, P.P. and Polimeni, R.S. (2008). The Complete CFO Handbook: From Accounting to Accountability. UK: John Wiley & Sons.
Ferguson, M.R. (2006). The Executive Branch of State Government: People, Process, and Politics. Australia: ABC-CLIO.
Graham, B. and Dodd, D.L.F. (2008). Security Analysis (6th ed.). USA: Tata McGraw-Hill Companies Inc.
Hitt, M., Ireland, R.D., and Hoskisson, R. (2006). Strategic Management: Concepts and Cases. USA: Cengage Learning.
Kasunic, T.K.F.T., and Kasunic, F.T. (2009). Supersize Your Small Business Profits!: How to Survive the Current Recession and Manage Your Small Business Profitably During Turbulent Economic Times. Australia: Trafford Publishing.
Lapovsky, L. and McKeown-Moak, M.P. (2010). Roles and Responsibilities of the Chief Financial Officer: New Directions for Higher Education, Number 107. Australia: John Wiley & Sons.
Lee, A.C., Lee, J.C. and Lee, C.F. (2009). Financial Analysis, Planning & Forecasting: Theory and Application. USA: World Scientific.
Moeller, R.R. (2007). COSO Enterprise Risk Management: Understanding the New Integrated ERM Framework. USA: John Wiley & Sons.
Nick Scali. (2016). About Us. Available At: https://www.nickscali.com.au/ [Accessed On: 18th Sep. 2016]
Oakes, K. and Galagan, P. (2011). The Executive Guide to Integrated Talent Management. USA: American Society for Training and Development.
Schneider, S., and Scanlon, B. (2011). The Board Game: Survival and success as a company board member. Australia: LID Editorial.
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