The Financial Staff’s Responsibilities

The financial staff’s task is to acquire and then help employ resources so as to maximize the value of the firm. Here are some specific activities:

1. Forecasting and planning. The financial staff must coordinate the planning process. This means they must interact with people from other departments as they look ahead and lay the plans which will shape the firm’s future.

2. Major investment and financing decisions. A successful firm usually has rapid growth in sales, which requires investments in plant, equipment, and inventory. The financial staff must help determine the optimal sales growth rate, and finance people must help decide what specific assets to acquire and the best way to finance those assets. For example, should the firm finance with debt, equity, or some combination of the two, and if debt is used, how much should be long term and how much should be short term?

3. Coordination and control. The financial staff must interact with other personnel to ensure that the firm is operated as efficiently as possible. All business decisions have financial implications, and all managers financial and otherwise need to take this into account. For example, marketing decisions affect sales growth, which in turn influences investment requirements. Thus, marketing decision makers must take account of how their actions affect and are affected by such factors as the availability of funds, inventory policies, and plant capacity utilization.

4. Dealing with the financial markets. The financial staff must deal with the money and capital markets. Each firm affects and is affected by the general financial markets where funds are raised, where the firm’s securities are traded, and where investors either make or lose money.

5. Risk Management. All businesses face risks, including natural disasters such as fires and floods, uncertainties in commodity and security prices, volatile interest rates, and fluctuating foreign exchange rates. However many of these risks can be reduced by purchasing insurance or by hedging in the derivatives markets. The financial staff is responsible for the firm’s overall risk management program, including identifying the risks that should be hedged and then hedging them in the most efficient manner.

In summary, people working in financial management make decisions regarding which assets their firms should acquire how those assets should be financed, and how the firm should manage its existing resources. If these responsibilities are performed optimally, financial managers will help to maximize the values of their firms and this will also contribute of the welfare of consumers and employees.