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FINANCIAL MANAGEMENT THE SUPERVISOR AS A FINANCIAL MANAGER Presented by: Orville J. Mighty April 27, 2017 LEARNING OBJECTIVES At the end of this session participants should be able to: • Differentiate between Financial Management and Accounting. • Explain how management decisions impact financial performance of a firm. • Analyse the supervisor’s role as a Financial Manager. LEARNING OBJECTIVES At the end of this session participants should be able to: • Observe ethical principles in financial operations. • Appreciate that all supervisory decisions have financial implications. WHAT IS FINANCIAL MANAGEMENT ? DIFFERENCE BETWEEN FINANCIAL MANAGEMENT & ACCOUNTING? FINANCIAL ACCOUNTING The systematic and comprehensive recording, summarizing , analyzing and interpretation of financial transactions. DIFFERENCE BETWEEN FINANCIAL MANAGEMENT & ACCOUNTING? FINANCIAL MANAGEMENT The effective and efficient management of organizational resources to achieve organizational objectives. OBJECTIVES OF FINANCIAL MANAGEMENT The objectives of financial management includes ensuring: • adequate supply of funds for the organization • optimal utilization of funds • a sound capital structure PRIMARY OBJECTIVE OF FINANCIAL MANAGEMENT The PRIMARY objective of financial management is to maximize the stock price of a firm. PROBLEMS WITH PROFIT MAXIMIZATION The goal is to maximize wealth, not just profit. Since profit maximization: • is a short term perspective • ignores riskiness of various projects • ignores the time value of money EFFECTS OF POOR FINANCIAL MANAGEMENT • Cash flow problems • Inadequate resources • Inability to exploit opportunities • Staffing issues • Business failure SCOPE OF FINANCIAL MANAGEMENT Evaluation of Risk Capital Budgeting Financing & Investments Time Value of Money GROUP ACTIVITY In groups of five (5), discuss how supervisors can help to enhance the financial performance of their organizations. (25 Minutes) GROUP ACTIVITY Resource Acquisition & Allocation Staffing Concerns Quality Control Risk Identification MANAGERIAL DECISIONS STRATEGIC & OPERATIONAL DECISIONS What products or services to deliver & how these are done INVESTMENT DECISIONS Asset acquisition, expansion etc. FINANCING DECISIONS How to finance investments – debt or equity THE SUPERVISOR’S ROLE AS A FINANCIAL MANAGER Planning and Forecasting Making Investment and Financing Decisions Coordination and Control Risk Management RISK DEFINED A risk is any deviation from what is expected. • It includes all types of uncertainty • It includes upside volatility (opportunities) RISK CATEGORIES Demand Shortfall Customer Retention Pricing Regulation STRATEGIC Debt and Interest Rates Poor Financial Management Liquidity Problems Foreign Exchange Movements OPERATIONAL FINANCIAL Management Capacity Supply Chain Issues Cost Overruns Employee Issues RISK ANALYSIS Risk Analysis is a process that helps you identify and manage potential deviations that could potentially impact on the chosen solution. QUALITATIVE RISK ASSESSMENT A heat map is a type of status report with color coding used to score the level of key risks. RISK TREATMENT Risk Avoidance Risk Acceptance Risk Transfer Risk Mitigation QUESTION TIME