Is the Cost of your Financing Higher than it Needs to be?

The cost of financing is one of the largest and most risk-associated costs faced by many organisations.

Alternative types of financing may be considered to reduce the cost of finance and also increase the future values of organisational cash flows in real terms.

Effective acquisition and use of financial resources is what managing corporate finance is all about, to create corporate value and translate it into shareholder value. Managing finance has become a number one priority for all organisations to ensure their survival and future prosperity, particularly as a result of the impacts of:

• The global financial crisis of 2008
• Decline in consumer demand in China and other countries worldwide
• Decrease in global demand for oil
• Continuing pressure on the oil price per barrel

And so development of the essential skillset required to support this is now therefore increasingly important.

Is the cost of your financing higher than it needs to be? Are some of your loans unnecessary or under-utilised, for example when new projects have been deferred or put on hold? Use of the appropriate tools and techniques necessary to achieve strategic financial objectives is essential to be able to deal with these and many other financing questions.

Organisations worldwide now increasingly use Islamic finance, the fastest growing element in the finance sector. Growing exponentially with an annual average growth rate of 17% between 2009 and 2014 Islamic finance was estimated to have a global worth of over US$2,000bn in 2014. In September 2016 the head of Islamic Finance at a leading financial agency stated that ‘growth in the Islamic banking sector continues to broadly outpace that of conventional banks’.

A good understanding of corporate financial management is essential to be able to assess the most appropriate levels and types of funding that optimise capital structure to minimise financing costs, and includes:

• Use of alternative types of corporate financing, including Islamic finance, to create corporate value and maximise shareholder wealth
• Financial planning models to evaluate financial strategies and the impact of alternative capital structures on weighted average cost of capital (WACC)
• Financing for real value-adding investment in domestic and international capital projects
• Hedging and derivatives to manage financial risk exposures to interest rates and foreign currency exchange rates volatility
• How corporate behaviour and corporate governance impact on long-term organisational success

To ignore the available financing opportunities that may reduce your cost of financing can have major consequences on the future of your organisation, for example:

• High finance costs that turn operating profits into losses
• Failed investment projects because of too high a cost of financing

Whether you are a financial or non-financial professional, or if you have treasury, cash management, project management, planning or director level reponsibilities, it is very important to keep your skillset updated relating to the management of corporate finance. To do this you need to attend the Managing Corporate And Islamic Finance, And Corporate Governance course presented by global world class training providers Glomacs (based in the UAE) who provide worldwide public and in-house training courses for financial and non-financial personnel at every level.

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