Summary
The current situation of non availability of credit is leading to a position where Chief Risk Officers and CFO's will have a difficult time in funds management, meeting profitability targets and running a business. Funds constraints will make it difficult to extend credit to customers when financial institutions and creditors are making credit vanish. Such a situation may also lead to conditions where accounts may be stage managed simply to keep creditors at bay. In this analysis I look at the peculiar conditions which I expect to come to play in the coming years and suggest that better control systems need to be in place not just in organizations but also in the wide spread global capital village.
Analysis
1. Poor credit availability will make it imperative for finance managers to ensure that suppliers are kept in good humor.
2. Poor credit availability conditions will also be a stimulus for window dressing of accounts in order to attract market capital as well as bank credit.
3. Customers may also face payment difficulties and frauds on the part of customers especially in collusion with sales staff may increase.
4. All the above point to situations where Risk Officers and CFO's will have their hands full.
5. Risk Officers in financial institutions as well as analysts will have to tooth comb prospective and existing seekers of capital to ensure that only the suitable investments with acceptable risk levels are appropriated.
6. Accounting risk and fair value measurements will also get impacted by the same.
7. The above are some of the factors which analysts and risk officers should look out for in the emerging scenario.
