Short-term economic setbacks force business spending cuts
Management accountants say organisations need to be resilient.
Tough economic circumstances are forcing business to undertake deep spending cuts.
KARACHI:
Global business is too easily knocked off course by short-term economic setbacks, such as the current US debt crisis, according to a global survey of finance and business leaders, who hold the Chartered Global Management Accountant (CGMA) qualification.
The survey, conducted by the Chartered Institute of Management Accountants (CIMA) and the American Institute of CPAs (AICPA), is based on interviews with over 1,300 members of these organisations.
About 68% of respondents feel organisations need to seek new ways to be resilient and less susceptible to macro-economic volatility. Only 32% of respondents believe the ongoing US debt crisis will ultimately push the global economy towards a recession.
About 53% feel global business is too easily thrown off course by short-term economic uncertainty, which creates difficulty in long-term strategic business planning. Over 45% of respondents believe business model reinvention is the only source of sustainable value creation.
CGMA business experts make up the world’s largest community of management accountants and guide business decisions across the globe in firms that include 95 of the world’s top 100 brands and 91 of the Fortune 100 companies, the statement released with the survey findings said.
According to Javaria Hassan, who heads CIMA in Pakistan, the possibility of another US debt crisis, Arab Spring or eurozone disaster in the future cannot be ruled out.
“Last two years saw continued economic uncertainty, as repeated crises hit the global economy,” she said. “This uncertainty simply cannot drive business strategy, which is prompting organisations to cut spending and investment at a time when innovation is vital to our economic health.”
Saying that the seizing of opportunities is the key to long-term survival, she stressed the need for adopting a suitable course of action balancing risk and innovation while managing the approach and mitigations put in place to address these uncertainties.
Suggestions
The survey also suggests that business leaders should adjust their “risk radar” and anticipate the impact of such scenarios on investment and future growth without being diverted from creating a suitable long-term strategy. In order to build resilience in the face of ongoing economic uncertainty, the report suggests that business leaders must understand what creates, and can potentially destroy, value in their business.
It also asks them to create a line of sight between capital sources and how it will be invested in the sustained success of the business beyond the short term.
Moreover, it recommends that they should ensure robust information flows by building confidence in the right information that drives investment and risk mitigation decisions.
At the same time, the survey suggests that they should go beyond defining a risk appetite by having a risk attitude that empowers all in the business to take appropriate risks, which ultimately drives growth and opportunity.
“The repercussions of US debt ceiling and spending decisions will reverberate across the global economy and may touch many of the world’s businesses,” the report quoted CGMA CEO Barry Melancon as saying. “Management accountants are bracing for short- and long-term implications, even as they look for ways to make their businesses less vulnerable to the pulses of geo-political forces.”
Published in The Express Tribune, March 10th, 2013.
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Global business is too easily knocked off course by short-term economic setbacks, such as the current US debt crisis, according to a global survey of finance and business leaders, who hold the Chartered Global Management Accountant (CGMA) qualification.
The survey, conducted by the Chartered Institute of Management Accountants (CIMA) and the American Institute of CPAs (AICPA), is based on interviews with over 1,300 members of these organisations.
About 68% of respondents feel organisations need to seek new ways to be resilient and less susceptible to macro-economic volatility. Only 32% of respondents believe the ongoing US debt crisis will ultimately push the global economy towards a recession.
About 53% feel global business is too easily thrown off course by short-term economic uncertainty, which creates difficulty in long-term strategic business planning. Over 45% of respondents believe business model reinvention is the only source of sustainable value creation.
CGMA business experts make up the world’s largest community of management accountants and guide business decisions across the globe in firms that include 95 of the world’s top 100 brands and 91 of the Fortune 100 companies, the statement released with the survey findings said.
According to Javaria Hassan, who heads CIMA in Pakistan, the possibility of another US debt crisis, Arab Spring or eurozone disaster in the future cannot be ruled out.
“Last two years saw continued economic uncertainty, as repeated crises hit the global economy,” she said. “This uncertainty simply cannot drive business strategy, which is prompting organisations to cut spending and investment at a time when innovation is vital to our economic health.”
Saying that the seizing of opportunities is the key to long-term survival, she stressed the need for adopting a suitable course of action balancing risk and innovation while managing the approach and mitigations put in place to address these uncertainties.
Suggestions
The survey also suggests that business leaders should adjust their “risk radar” and anticipate the impact of such scenarios on investment and future growth without being diverted from creating a suitable long-term strategy. In order to build resilience in the face of ongoing economic uncertainty, the report suggests that business leaders must understand what creates, and can potentially destroy, value in their business.
It also asks them to create a line of sight between capital sources and how it will be invested in the sustained success of the business beyond the short term.
Moreover, it recommends that they should ensure robust information flows by building confidence in the right information that drives investment and risk mitigation decisions.
At the same time, the survey suggests that they should go beyond defining a risk appetite by having a risk attitude that empowers all in the business to take appropriate risks, which ultimately drives growth and opportunity.
“The repercussions of US debt ceiling and spending decisions will reverberate across the global economy and may touch many of the world’s businesses,” the report quoted CGMA CEO Barry Melancon as saying. “Management accountants are bracing for short- and long-term implications, even as they look for ways to make their businesses less vulnerable to the pulses of geo-political forces.”
Published in The Express Tribune, March 10th, 2013.
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