ROLE OF FINANCIAL MANAGER IN THE CHANGING SCENARIO

The Indian financial system is currently undergoing a period of revolutionary

changes to the extent that by the turn of millennium its face may be totally
unrecognizable. In view of the strategy facts of a firm today should not be merely
aiming at customer’s satisfaction by meeting the current and contractual need but it
should also be to delight the customer by meeting their intended needs In this
changing scenario, the role of a finance manager has also changed. He has to be an
active player and vociferous participant and not just a by-stander in the corporate
world. The finance professional must now be conversant with both theoretical and
analytical issues existing in the market, e.g. funding of investment channels, risk
and rewards attached with a variety of financial instrument channels, legal and tax
parameters.

Globlisation has integrated the national financial market with the global financial
market. This has brought new opportunities and challenges for the finance
managers which are bound to influence the various financial decisions as explained
in the following:

 Financial decision:- globlisation has made possible for the corporate

enterprises to raise funds at competitive rates from foreign markets. Foreign
institutional investors and NRIs can be approached to have least cost capital
structure.
 Investment decision:- corporate enterprises now have the opportunity to
invest money in both outside the country for the maximaistion of wealth of
their shareholders. However, investment made outside the country involves
the following risks
 Political risk:- asset or easn`32ings in a foreign country may be
frozen.
 Regulatory risk: - accounting procedures taxation provisions may be
altered in the frozen country.
 Economic risk: _ long term contracts with foreign suppliers or
purchasers may be affected by change in exchange rates.
  Dividend decision:- the dividend decision has also to be taken by the finance
manager in the overall global scenario, portfolio opportunities in and outside
the country and internal financial needs of the business unit.

The process of liberalisatiopn and globilisation has led to significant increase in the
competition for the Indian industry which otherwise was functioning in a protected
and sheltered environment. This has resulted into sickness of many industrial firms
who could not keep up with the global competition in providing goods and services
of the best quality at the lowest possible price to the consumers. However,
globilisation has resulted into the following positive benefits to the Indian industry:

1. There has been boost in trade and commerce.

2. There has been sizeable increase in number of foreign collaborations
resulting in transfer of latest technologies to the country.
3. Optimum utilization of financial, material and human resources which has
led to improvement in overall efficiency.
4. Larger capital inflows resulting in greater industrialisation besides
strengthening the foreign exchange reserves position.
5. Development of infrastructural facilities and new financial instruments.

RELATIONSHIP BETWEEN FINANCIAL MANAGEMENT AND

OTHER AREAS OF MANAGEMENT
Financial management is an applied field of administration. Every business activity
requires money and hence financial management is closely related with all other
areas of management. The relationship between financial management and other
areas of management has been explained below:

FINANCIAL MANAGEMENT AND COST ACCOUNTING

Most of the large companies have a separate cost accounting department to

monitor expenditures in their operational areas. The cost information is regularly
supplied to the management for control purposes. The finance manager is
concerned with proper utilization of funds and therefore he is rightly concerned
with operational costs of the firm. The information supplied by the cost accounting
is of utmost importance to him and he makes suitable recommendations to keep
costs under control.

FINANCIAL MANAGEMENT AND MARKETING

Marketing is one of the most important areas on which the success or failure of the
firm depends to very great extent. The philosophy and approach to the pricing
policy are critical elements in the company’s marketing effort, image and sales
level. Determination of the appropriate price for the firm’s products is of
importance both to the marketing and finance managers and, therefore, should be a
joint decision of both. The marketing manager provides information as to how
different prices will affect the demand for the company’s products in the market
and the firm’s competitive position while the financial manager can supply
information about costs, change in costs at different level of production and the
profit margins required to carry on the business. Thus, the financial manager
contributes substantially towards formulation of the pricing policies of the firm.

FINANCIL MANAGEMENT AND ASSETS MANAGEMENT

Assets are resources necessary for conducting the business of the firm. They
include both fixed and current assets. The acquisition of assets, their proper
maintenance, etc., involve finances. Hence the financial manager is concerned with
both acquisition and utilization of the firm’s assets. He together with other officials
of the firm, takes decisions regarding current and future utilization of the firm’s
assets. The competition or mix of assets for achieving the firm’s goals in the best
possible manner is also a matter of joint decision of the financial manager with the
other concerned officials of the firm.

FINANCIAL MANAGEMENT AND PERSONAL MANAGEMENT

The recruitment, training and placement of staff is the responsibility of the

personnel department. All this requires finances and therefore the decisions
regarding these aspects cannot be taken by the personal department in isolation of
the finance department.

The attitude of the firm towards other management areas is largely governed by its
financial position. A firm facing a critical financial position will devise its
recruitment, production and marketing strategies keeping the overall financial
position in view. While a firm having a comfortable financial may give flexibility
to the other management functions, such as, personnel, production and marketing.
Thus, in the former case, the recruitment, production and marketing policies are
adjusted according to the financial policies.

FINANCIAL MANAGEMENT AND FINANCIAL ACCOUNTING

The information provided by financial accounting is used by the financial manager

to take decisions top help the organization in achieving its objectives. Thus,
financial accounting is data collecting process dealing with accurate recording and
reporting while financial management is a managerial decision-making process.
Stated briefly, financial accounting is concerned with the management is
concerned with the management of funds.

The main objective of financial accounting is to keep a systematic record of the

transactions of the company.

Financial management, on the other hand, is primarily concerned with the task of
ensuring that the funds are procured at optimum cost and involve minimum
financial risk.

FINANCIAL MANAGEMENT: SCIENCE OR ART

Financial management is both a Science and Art of course it is neither a pure

science like physics nor an art like painting. It is a science because it consists of
certain basic principal and procedure based on various theories, capital structure
theories, etc; it also takes the help of various statistical techniques. Econometric
models, computer technology etc for taking financial decision like budgeting
decision, investment decision, capital structure decision etc as a result it will be
appropriate to say that financial management is an applied science.
It is also an art since the application of human judgment and skills is also necessary
for effective management of finances .financial decision cannot wholly be derived
on the basis of mathematical of computer based package. A lot of description and
judgment has to be used by the finance manager.