Global Finance and Local Results
To those outside of it, international finance seems like a murky pool of inscrutable devices and untrustworthy characters. While it is true that some sectors of the global money markets are questionable, the vast majority of all business transactions are above board and perfectly logical.
The most recent downturn in the economy and the slow global recovery once again demonstrated to people that global finance can often affect their personal and professional lives.
Understanding how global financial markets can affect your company’s bottom line is the role of the Chief Financial Officer (CFO).
Some of the most obvious effects can include the collapse of markets, significant stock value losses, and credit crunches that can lead to cash starvation for a single company, as well as whole national economies.
It is not, however, all negative. A great CFO is able to see when new markets are emerging, when profitability will be enhanced by growth, and when acquiring outside financing is a solid move for a company.
Over the last several years, I have overseen the modernisation of my company, as well as a reduction of 35% of the full-time employees. While these types of changes are never easy, by understanding how the global market will affect the business, I was able to advise the CEO and the Board of Directors as to when to act and how to best leverage their assets.
During this same time, the company undertook a $550 million expansion. The balance between contraction in some aspects of the business and the expansion in others is a result of being able to see the global financial effects on the local market.
One part of the global economy that is confusing for outsiders is that there are usually as many expanding markets as there are contracting markets. This is one of the most powerful effects of the global economy on a single company. Knowing in which markets to expand a company’s reach and which markets to back out of is as important as understanding the ebb and flow of the stock market.
The Current Global Economy – A Few Insights
There is a slow contraction of business back from places like India and China. This being caused partly by a reduction of expenses in traditional industrial countries, like Russia, the United States, and Western Europe. It also being driven by a steady increase in expenses in these newer power economies. As workers seek a better lifestyle, countries begin to feel the windfall of increased taxes, and reasonable regulations begin to take effect, the playing field is slowly levelling for the two sectors.
For companies located in the traditional industrialized markets, this might be a time to consider expansion and acquisition. Many of the properties that were once extremely expensive in the United States and Europe are now much less costly, simply because the exodus to China, Southeast Asia, and India left a great deal of open inventory.
Of course, every case is unique, but now may be the time to become more aggressive after a long period of caution.
About the Author
Rene Blum was the former CFO of the Holcim Group Russia and before the former European CFO of the European Holcim White Division. Over the past 10 years, he has helped to guide Holcim through stockholder divestment, staff shrinkage, corporate growth, and significant acquisitions. As the financial leader of several divisions of this multi-national companies, Rene Blum has gained insight into global markets and their effect on his company and its business dealings.