Strategic Financial Management
Candlefocus EditorUnderlying strategic financial management is the need to identify and prioritize key objectives that will allow the company to achieve long-term success. Goals are typically developed over a shorter period of time based on higher-level strategy. Strategic financial managers may then explore various types of financial decisions to meet those goals, taking into consideration tax implications, liquidity and risk factors, and other business considerations. These decisions may include creating financial projections, developing new funding and financing solutions, and assessing financial instruments to address the company’s risks.
A financial plan is a critical component of SFM, as it serves as a blueprint for achieving the company’s objectives by providing measurable targets and actionable items. When developing a financial plan, SFM managers consider the company’s performance over the previous years and analyze how it has reacted to certain changes in the market. This allows them to better prepare for future events, including opportunities and risks. They may also examine the financial environments of competitors and industry trends to establish benchmarks and set realistic goals for strategic financial growth.
SFM is a continuous process that should be approached with a sense of flexibility, as business goals may evolve over time and require different strategies. SFM activities should be regularly reviewed and periodically assessed. This can be done through testing and evaluation measures, such as stress testing, financial modeling, and risk analysis, which enable SFM managers to identify areas of improvement and increase their accuracy in forecasting outcomes.
In summary, strategic financial management is an important process that companies must undertake to ensure long-term success. It involves a thorough analysis of the company’s position and objectives, forecasting of future events, and the implementation of strategies that maximize returns while minimizing risk. A well thought out financial plan serves as the foundation of the process and should be tailored to the particular company’s circumstances in order to maximize profitability. With the right strategies and processes in place, companies can more effectively optimize the use of their resources and create the necessary environment for long-term success and growth.