It is essential to understand how finance influences strategic decision-making in any organisation because it is the foundation for economic survival, development, growth and future prosperity.
Are you familiar with the core principles of finance and their links with strategic decisions, and financial planning?
Can you use the financial tools, techniques and know-how that influence strategic decision-making in real-life business situations?
The finance know-how required to support strategic management includes an understanding of:
- How strategic decision-making processes link with financial planning and budgeting
- The financial statements and their links with financial planning, and strategic decision-making
- Costing, budgeting and performance measurement systems that support strategic decision-making
- Capital investment decision-making using discounted cash flow (DCF)
- Long-term debt and equity financing decisions, capital structure and the weighted average cost of capital (WACC)
- The linking of key performance indicators (KPIs) to strategic decisions using systems like the balanced scorecard
- The analysis and management of financial risk, interest rate and foreign currency exchange rate exposures.
Successful strategic decision-making requires the use of these essential financial tools and techniques. They enable non-financial and financial professionals at every level to make better-informed decisions to improve organisational performance and increase corporate value, with the aim of achieving the primary commercial objective of maximisation of shareholder wealth. The levels and range of risk faced by organisations are increasing daily and so effective risk management is essential to minimise the impacts of financial and other risks to strategic decisions.
For the financial tools and techniques to be effective in influencing strategic decision-making it is important for managers to:
- Develop their ability to think strategically – long-term and wide-ranging
- Be able to analyse and evaluate the financial consequences of alternative strategic decisions
- Use risk analysis and appropriate techniques of risk management.
The failure of managers to fully appreciate the influence of finance on strategies, and to be unaware of the financial consequences of alternative strategic decisions, may result in:
- Unrealistic and unattainable strategic plans
- Investment in non-value adding projects
- Sub-optimal capital structures and high costs of capital (WACC)
- Unnecessarily high exposures to financial and other risks.
You can develop the self-confidence to communicate effectively with financial and other professionals on all the above financial and strategic issues. This will come from having a clear understanding of the tools and techniques, and the financial factors that influence strategic decisions. Understanding Finance To Influence Strategic Decisions is a course that engages all participants in a very accessible way to deal comprehensively with all these areas. It is provided by world class public and in-house training providers Glomacs (based in the UAE) and Oxford Management (based in the UK) who present a wide range of courses worldwide.