8. What are the current developments in financial management and the securities markets?
Many of the key trends shaping the practice of financial management echo those in other disciplines. For example, technology is improving the efficiency with which financial managers run their operations. In the wake of a slowing economy and corporate scandals, the SEC assumed a stronger role and implemented additional regulations to protect investors from fraud and misinformation. A wave of merger mania hit the global securities markets as the securities exchanges themselves have begun to consolidate to capture larger shares of the world’s trading volume in multiple types of securities. Online brokerage firms are seeking new ways to capture and keep their customers by broadening the services they offer and keeping the fees they charge highly competitive. Let’s now look at two key trends in greater detail. In the era of the Sarbanes-Oxley Act, CFOs find themselves balancing a strategic focus with overseeing corporate compliance with the act. The NYSE and NASDAQ are battling for supremacy as the regional exchanges look for niche markets to exploit.
Finance Looks Outward
No longer does finance operate in its own little world of spreadsheets and banking relationships. Most CFOs want the finance function to be viewed by their company’s business units as a strategic partner who can contribute to their success. Finance professionals therefore need a broad view of company operations to communicate effectively with business unit managers, board members, creditors, and investors. The goal is productive cooperation and teamwork between finance and the business units to meet corporate objectives. CFOs are more highly visible and active in company management than ever before. They serve as both business partner to the chief executive and a fiduciary to the board.
In the aftermath of recent accounting scandals and the global recession of 2008–2009, CFOs consider accuracy of financial reporting their top priority, and they also must now provide more detailed explanations of what’s behind the numbers to board members and other stakeholders. Rather than showering the board with financial reports and statistics, CFOs are crafting more focused presentations that deal with the company’s overall financial health and future prospects.27 They must also educate board members about the implications of Sarbanes-Oxley and other legislation, such as Dodd-Frank, and what the company is doing to comply with federal regulations.