Challenges Faced by Financial Managers in a Changing Economic Environment

Students should complete one of the essays described below. The essay is due in the individual’s Assignments Folder as indicated in the Course Guide/Schedule.

The essay should demonstrate a student’s ability to integrate and synthesize course concepts with selected readings to communicate his/her understanding of financial management concepts and their application in organizations. The essay should also demonstrate a student’s ability to communicate as a manager. This includes proper writing style, organization, grammar, and spelling, as well as integration of course-related material. The writing style must follow the Publication Manual of the American Psychological Association , 6th edition. Citations for online sources should include the online address (URL) and access date as well as the citation for the specific reference.

Research for the paper may be conducted online using the UMGC online library as the primary source. Do not use abstracts, use full-text articles. Publications that may be relevant for the topics listed below include: Strategic Finance, The Journal of Business Finance and Accounting, CFO Magazine, Nonprofit World, Harvard Business Review, or other accounting and financial journals.

The paper should:

Be based on your reading and research relevant to the topic.
Be 5 to 6 double-spaced pages, not including the title page, executive summary, appendices, exhibits, and references.
Include a one-page Executive Summary immediately following the title page that includes a statement of the major issue(s) and your conclusions and specific recommendations. The content of an Executive Summary is similar to an abstract.
Properly cite reference sources: these may include course material, information from magazines, journals, and online sources. All reference sources must have a publication date within the last fifteen years. Students who wish to use an older source publication should contact the instructor with the request and reason.
Essay Topics/Individual Research Paper: Select one of the following topics

2. Challenges faced by Financial Managers in a Changing Economic Environment

Your essay should critically asses the challenges faced by financial managers due to changes in the macroeconomic environment and how these impact businesses operations. Emphasize how there are consequences related to changes in strategies and priorities and in the way the departments adjust.

ANSWER

Challenges Faced by Financial Managers in a Changing Economic Environment

Abstract

Financial managers play a vital role in the growth and productivity of businesses. They deliver financial reports, handle investment activities and other long-term strategic corporate goals. Amidst the need to guarantee quality financial health, these professionals face distinct challenges in the changing economic environment. These problems revolve around governmental regulation challenges, foreign exchange rate fluctuations, inflation, and government deficits. These issues challenge their ability and capacity to make viable financial decisions. The institutional management level has a key role to play in lessening the impact attributed to these problems. Quality culture and structural designs enable leaders to address challenges that financial managers encounter when handling their duties and responsibilities.

Challenges Faced by Financial Managers in a Changing Economic Environment

Government Regulations

A change in government regulations has negative effects on the financial management role. A study by Jaradat et al. (2018) shows that businesses face finance-related problems due to issues arising from government rules. Policies developed by the government affect financial decision-making processes for investment purposes. Increased regulations hamper innovations as financial managers have numerous workloads brought about by the change. It limits their time and efforts in making excellent financial investment decisions as they spend most of their time ensuring that they understand and follow the new regulations correctly. For example, if the government generates new rules and regulations targeting increased business taxations, this can affect working capital management. Excess payments that the business is expected to deliver to the government affect an organization’s financial status. Financial managers have a rough time balancing available finances to ensure they align with the government regulations and provide the business with a significant resource base for investments.

Fluctuation in Foreign Exchange Rates

Financial managers continue to experience challenges in their tasks and responsibilities due to fluctuation in foreign exchange rates. These fluctuations challenge their ability to make vital decisions. For example, a weaker currency generates an increased cost of imports. A business dealing with import services bears a significant rise in its cost of production. Financial managers working in such an establishment find it hard to balance their inputs and outputs. For example, when handling dividends, fluctuations in foreign exchange rates complicates decisions aligned to the benefits that shareholders stand to gain. Financial managers struggle with inadequate decision-making processes due to foreign exchange fluctuations that keep emerging over time.

Inflation

Inflation is a common occurrence in today’s business environment. Financial managers face numerous hurdles as they strive to make key decisions. The constant price change is a key threat that destabilizes financial plans in any business environment (Mahmoud Hamman & Mahmood, 2012). Inability by these professionals to make appropriate consultations for preparedness is an aspect that accelerates their inability to develop strategic decisions. There is a dire need to ensure that they consult the possible effects attributed to inflation to make viable decisions. However, the inflation fluctuations make it hard for financial managers to create quality budgets that reflect the current needs. For example, if inflation rises, a business may be forced to invest additional funds to manage its processes. These might include fixed assets or working capital. The outcome would be an increased cost of production that hampers an overall initiative. Thus, inflation is a major challenge that financial managers face in their role. Amidst these factors emerging in a changing economic setting, structure and design might also generate challenges for these professionals.

The Role and Impact of Structure and Culture Design

Workplace culture and structures impact the role of financial managers. Quality culture and well-established structures ensure that financial managers can work in a conducive setting that enhances their growth and productivity. On the other hand, a poor organizational culture fails to accelerate motivation and job satisfaction leading to inadequate outcomes. Financial managers act as the foundation behind a business’s growth. These professionals are guided by the culture and corporate structures developed by the top-leadership level. As Yesil and Kaya (2013) reveal, organizational culture is effective in organizations’ functioning and performance. It determines the likelihood that an establishment achieves the expected milestones and objectives. For example, financial managers handle financial reporting and making strategies and plans for long-term goals. If the workplace culture fails to provide the appropriate mechanisms, their desire to achieve the targeted goals and objectives becomes limited.

Culture and structure operate effectively in good workplaces. Organizations with quality cultures create a suitable working environment. Notably, they provide suitable structures and systems that enable workers to handle and manage their duties appropriately. These establishments support decision-making and improve workflow due to the presence of an excellent corporate culture. On the other hand, bad workplaces challenge workflows and other organizational processes and functions. They lack a supportive culture and thus expose workers to inadequate systems and structures. For example, financial managers require tools such as accounting software, payroll management, and inventory tracking. If the top-leadership level fails to provide these structures, there is a high chance that these professionals will experience massive challenges fulfilling their responsibilities. It portrays a bad workplace that fails to offer appropriate assistance for the workforce. Leaders should always ensure that they create quality cultures that enable workers to handle and deliver their duties successfully. An excellent workplace culture guarantees access to essential work structures and systems. Culture plays a vital role in motivating and shaping behavior in the workplace (Szcepanska-Woszcyna, 2017). Leaders should ensure that they create a supportive culture to enhance innovation as a viable system of values and practices that motivates employees to become creative and innovative.

The Link between Structure, Culture and their Effectiveness and Efficiency

Culture and structure are interrelated as they determine organizational performance and productivity. A workplace culture revolves around a system of beliefs and practices that guides employees. For example, cultural values such as accountability, responsibility, and honesty are crucial in guiding financial managers’ roles. These workers ensure that they always observe these values when handling their duties and responsibilities. Corporate cultures support the effective use of resources and attainment of the set goals and objectives. The organizational structure results from the workplace culture where leaders can develop support mechanisms that ensure employees deliver excellent results. Overall, the structure is developed under the influence of the culture, where it positions a company in a better place to implement changes efficiently and effectively.

Companies with a Good and Poor Culture and Structure Design

Zappos and Google have quality culture structural designs that have enabled them to meet their goals and objectives. Zappos has fun and dedicated cultural framework that allows employees to achieve greater motivation in their tasks. It has a set of corporate values that revolve around self-management (Kumar & Mukherjee, 2018). All team members selected to join the company fits with the workplace culture. This has enabled the business to create an excellent workplace environment for all its professionals. Google also has a quality culture and structural design. The company has a flexible culture where employees are free to express their ideas. It always ensures that workers are happier, creative, and productive. Uber and are deemed as having inappropriate cultures and designs. Uber has always been on the frontline for sexual harassment and discriminatory practices. This shows an absence of quality culture and structural designs. As Cook, Patel and O’Rourke (2019) state, Uber has a toxic culture that affects worker productivity. Its top-management level has failed to develop a supportive corporate culture. The other firm with a poor culture is Forever 21, which fails to consider the employee’s personal and professional development. For example, it does not offer adequate workforce benefits (Comen, Stabbins & Frohlich, 2016). This portrays a business that disregards workforce needs and interests.

Recommendations and Conclusion

Company leaders should always ensure that they create an excellent workplace culture that meets all workers’ needs and interests. One of the approaches for achieving this is moving beyond bureaucratic systems to flexible ones.  In today’s changing environment, flexible systems are viable compared to bureaucratic ones in boosting productivity. As Petkova (2015) reveals, bureaucracy spells out capitalist relations in the workplace. The top-level leadership stands to benefit at the expense of the workers. Thus, a flexible structure is essential as it enhances adjustment when necessary. Over time, leaders should assess the workplace culture to ensure that it aligns with the workers’ current needs and interests. Close monitoring and evaluation of cultural values and practices allows leaders to adjust when necessary for the welfare of the workers and the business at large. Overall, there is a dire need to ensure that leaders develop and implement effective and efficient systems and structures often supported by a quality workplace culture.

References

Comen, E., Stabbins, S., & Frohlich, T. (2016). 10 Worst Companies To Work For. HuffPost. Retrieved 7 March 2021, from https://www.huffpost.com/entry/worst-companies-to-work-for_n_575b26b0e4b0e39a28ada793?guccounter=1.

Cook, J., Patel, R., & O’Rourke IV, J. S. (2019). Uber Technologies, Inc.: Accountability in Corporate Culture. Journal of Organizational Behavior, 11, 33-50.

Jaradat, Z. A., Taha, R. B., Zin, R. B. M., & Zakaria, W. Z. W. (2018). The impact of financial accessibility constraints and government regulations on the organizational performance of small-and-medium-sized enterprises. Journal of Business and Retail Management Research, 13(1).

Kumar, V., & Mukherjee, S. (2018). Holacracy–the future of organizing? The case of Zappos. Human Resource Management International Digest.

Mahmoud Hamman, A., & Mahmood, B. (2012). The Impact of Inflationary Conditions on Financial Planning of Manufacturing Firms in Kaduna State. Journal of Accounting Research and Practice.

Petkova, I. (2015). Bureaucratic versus non-bureaucratic organization: explaining form, function, and change in new forms of organizing. Management and Organizational Studies, 2, 33-51.

Szczepańska-Woszczyna, K. (2015). Leadership and organizational culture as the normative influence of top management on employee’s behavior in the innovation process. Procedia Economics and Finance, 34, 396-402.

Yesil, S., & Kaya, A. (2013). The effect of organizational culture on firm financial performance: Evidence from a developing country. Procedia-Social and Behavioral Sciences, 81, 428-437.