Strategic Financial Management - Essay Example

Understanding current approaches to managing risk and uncertainty in the appraisal of capital investment projects require a deeper insight into the role of financial management in the modern business corporation. Unlike in the past when finance managers merely oversaw the accounting function, recent advances in technology changed the way business is conducted around the world, resulting in the radical transformation of financial management. Presiding over processes that cut across the business, financial managers set strategy, lead crucial change initiatives, and act as real partners in decision-making.

The title Chief Financial Officer (CFO) indicates a bigger role for financial managers in ensuring corporate growth. They design ways to maximise shareholder value on a sustainable basis, not only to meet quarterly targets but to transform the corporation into a forceful influence on their industry, nation, and the world. In a globalising world where financial markets operate 24/7, the CFO has to know how to build world-class resource support that would keep the business sustainable. This requires the CFO to instil in the corporation a more positive approach to structural and process streamlining and risk management (Read & Kaufman, 1997, p. v-vii). Events in the past decade highlight the transition of the finance function into strategic financial management, giving emphasis to the importance of present decisions on the future of the business.

The focus shifted from profits and into strategic issues of control and adding substantial shareholder value on a sustainable basis. In the wake of the financial scandals early this century, CFOs have focused on managing uncertainty and risk, working hard to avoid nasty surprises in financial reporting, ensure the firm’s conformity with laws and regulations, and sustain a strong credit rating. In fact, managing risk has become one of the most important functions of strategic financial management.

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