Financial managers are responsible for the financial well-being of an organization. They are put in charge of having reports and develop strategies regarding short or long-term goals for the organization.
All companies have a financial manager. To occupy their responsibilities there are challenges that financial managers must work through. of these challenges, two of them are ethics and competition. Ethics can become a significant issue due to the amount of money that’s constantly moving around.
When dealing with procurement and fund allocation there’ll always be opportunities for personal gain, but our ethics or moral compass must be first. Also, competition is a major problem within the financial management Financial managers at all levels have a bunch of responsibilities when it comes to the management of money. One of the articles that I used had dealt with financial management and ethics inside of the Department of Defense. The financial managers inside of the Department of Defense are faced with higher levels scrutiny since they are responsible for the spending of public money from taxes collected from the taxpayers of the United States. The spending of this money is more scrutinized than any private sector financial management. All companies need to implement a code of ethics that lays out the do’s and don’ts of the company. It should layout acceptable practices and unacceptable practices when it comes to dealing with vendors, procurement, and just the money in general. These guidelines wouldn’t only be used for financial managers, but also those people that are entrusted with the allocation of money at any level.
Financial managers would be the most important because their approval is what would drive the procurement. A good way for financial managers to ensure that there isn’t financial waste and that what’s procured meets the requirements exactly is to determine the requirements upfront. This way everyone on the procurement team knows the parameters they are going to have to work with and they know what vendor’s they can go to with these requirements. This practice would lessen the amount of unnecessary spending on things not required. Also, “the financial managers should ensure to classify spending as expenses or investments and ensure that the spending that is supposed to be an investment doesn’t end up being an expense (operational cost). Financial managers must be fully aware of every factor associated with purchases within their organization, particularly those that are not routine” (Clavien, 2015).
Another challenge that they might encounter is the challenge of competition. Competition among businesses is a daily thing in the business world. Hardly will you find a company that has no competition when it comes to the products or services that they offer. Competition drives the cost and pricing. If a company were the only provider for a certain service or product, then they would essentially be able to ask for whatever price they wanted without having to worry about whether the price would put them out of reach from their customers. Financial managers must stay ahead of the competition to ensure that the cost for the company to produce a product or service stays competitive, but at the same time yields the greatest amount of profit. The article I used for this question discussed the completion among banks and real estate companies.
“Banking competition shows that banks with less competition are more likely to face regulatory intervention because they are more likely to engage in risky activities” (Akins, Li, Ng and Rusticus, 2016). These banks are also most likely to fail due to the risky activities rather than banks with competition who end up having to be more conservative with their business practices to ensure they stay competitive. Real estate companies’ studies showed that they that didn’t have much competition in their area experienced great reward for the risks during the times that would be considered a financial boom, but experienced great failure when the boom ended. These companies ended up experiencing the steeper decline in a lot of foreclosures due to their mortgage approvals, even though higher, resulted in more defaults because of lax screening. These studies go to show that the presence of competition increases financial stability. The role of financial managers is one of the most important in a business.
Financial managers must stay ahead of all competition situations, product requirements, and ethical standards at a minimum. A good financial manager will manage their team to ensure that everyone understands the ethical standards. Failure to abide by business ethical standards can’t only put the individual in jeopardy, but can put the company in jeopardy for improper practices.