Executive Summary
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CFOs have to balance long-term planning with short-termist behavior in the markets.
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In order to do this, it’s essential to have a good business model, a clear understanding of business risk, sustainable revenues, and proper communication.
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Failing to manage the financial information systems well can seriously damage your brand. Getting it right will please both short- and long-term investors.
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Matters have been complicated by the globalization of standards and reinterpretation of company accounts.
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Tangible value creation remains top of the agenda. When investors are frightened or lose faith, they can destroy value much faster than you can create it.
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Relationship management is one of the most important new skills to acquire on the road to success.
Introduction
Corporate purpose, for most companies, is to create and sustain long-term stockholder value. However, markets can be driven by fear or euphoria. Stuck in the middle are top managers, especially the CFOs. They have to balance long-term planning with “short-termist” behavior in the markets. How can this be achieved? What are the new metrics for survival and sustainable prosperity?
As some companies have destroyed value, some have begun to question whether stockholder value should be a goal, or rather a consequence of excellence. In both quoted and private companies you need a clear, understandable business model that works; to be able to explain it easily and consistently; to understand strategic business risk and make it work for you; to generate sustainable revenues, income, and cash with rapid and reliable reporting; and no surprises!
Managing Investors’ Expectations
Managing stockholder value is also about managing expectations. The major long-term players (institutions, pension, investment, and insurance funds) are advised by analysts. Short-term investors, traders, and the public are more influenced by news flow and market movements. How can we reconcile these forces? By timely financial information, “no surprises,” always having cash, and finally, having a credible, understandable business model.
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