Finance lesson for executives
Caribbean corporate executives are being urged to update their knowledge of financial risks, solvency, bankruptcy laws and regulations.
This advice is coming from the Caribbean Corporate Governance Institute (CCGI).
In a presentation outlining what every director needs to understand about their company making a profit and being able to meet its financial obligations, the CCGI noted that there have been many changes in solvency and bankruptcy laws and regulations, particularly in Trinidad and Tobago.
While noting the importance of being aware of the laws within the home country, CCGI said it was also prudent to know the bankruptcy laws and regulations in countries where customers and suppliers were located.
“It is no longer sufficient for a director to simply ask ‘what’s the bottom line? Are we making a profit or not?’. Without exception, every director needs to understand the nature of financial risks for the company,” said Dr Axel Kravatzky, chairman of CCGI.
Speaking directly on the role of company directors, Kravatzky warned: “Do not abdicate your fiduciary duty as a director and rely blindly on the other board members to carry out financial assessments.”
Insisting that “every director needs to understand financial statements”, executives were encouraged to make regular use of financial ratios and know how to make basic analyses and interpretations.
According to Kravatzky, “board directors need to understand the ratios of their own organisations and those of their creditors.”
“The board as a whole needs to determine the areas of risk and financial management that are significant, and establish policies,” he said.
In addition, risk appetite and tolerance and thresholds should be determined by the board and recognition must be given to the fact that “different stakeholders will have different perspecives on risk”.
Barbadians can benefit from the CCGI in an upcoming board certification workshop on November 11 and 12 at Hilton Barbados.