This morning I see the finance minister as CFO of a financially
stressed company. She faces all the problems a highly stressed business could
in bad times. For example—
- The business of the company has witnessed considerable slow down in past few years. The revenue has shrinked and losses have increased.
- The ability to modernize and expand has been constricted as stressed balance sheet and poor cash flows are hindering capital expenditure.
- The investors are reluctant to commit more capital as the return on past tranches of investments has been poor.
- The company is not able to sell non-core businesses and assets to mobilize the resources needed to sustain the ongoing capex as well as the current repayment obligations.
- The competitors have snatched market share with competitive pricing and better delivery.
- The ability to retain talent has been hampered due to a variety of constraints.
- The rating agencies have put the company on watch list for a possible down grade.
- The top management of the company is struggling with allegations of misgovernance and failing to deliver on promises.
- To make the matter worst, the new accounting system put in place a couple of years ago has still not stabilized. Many claims have been overpaid and many have been rejected erroneously.
Given these circumstances, you imagine the plight to the CFO
(here minister), if -
- Most debtors are unable to discharge their obligations and are seeking debt waiver or substantial concessions.
- Employees are threatening strike if salaries are not hiked and non-core assets are sold.
- Raising prices of goods and services is mostly out of question due to already precarious competitive positioning.
- Shareholders are seeking higher dividend.
- Creditors want equity to be diluted materially and debts be discharged to deleverage the balance sheet. Any increase in leverage ratios is strictly no-go zone.
- The media has already declared that the CFO is going to lose her job in a month. They have also declared a retired banker as her successor. The management has neither confirmed nor denied these viral media posts.I would never wish anyone to be in her shoes. Nonetheless, I would not refrain myself from offering my five cents to the finance ministers:
(1) Avoid jingoism.
(2) Don't try to please
all, because you cannot.
(3) Incremetalism will not
help anyone at this stage. Do some zero based thinking.
(4) We need ship loads of foreign
capital and technology to survive and grow. Respect them for what they have.
(5) Focus on your strengths
not weaknesses. Give euthanasia to the people who have been already declared
brain dead.
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