Research digest
CASH MANAGEMENT
Organisations are focusing more on cash management and working capital in the wake of the economic recession, according to a global survey of business leaders.
The research by Ernst & Young revealed that 68 per cent of companies have conducted a top-down review of cash management in recent months, while 52 per cent have built working capital measures into the performance objectives of senior management (see chart 1, below).
Thirty-six per cent of respondents were considering using assets such as property to generate cash, and 21 per cent were making emergency plans to release extra funds.
Many organisations were taking further steps to maintain liquidity, with 43 per cent looking at disposing of assets or shutting down or selling parts of the business, 35 per cent making an inventory of all debt covenants and monitoring compliance, and 33 per cent using short-term finance.
But 26 per cent were taking no such steps and said cash was not an issue for their organisation.
The survey also found that 84 per cent of companies had undertaken a cost-savings analysis amid the recession. Supply chain was seen as the function that offered the richest opportunities for cost reduction, with 58 per cent seeing this as a major contributor, followed by operations
(57 per cent), IT (43 per cent) and sales and marketing (41 per cent).
Internally, the most common targets for savings were staff (60 per cent), IT projects (44 per cent) and employee benefits (42 per cent).
www.ey.com
SHAREHOLDER VALUE
Global economic turmoil has temporarily increased the importance of governance programmes to shareholder value and reduced the contribution of environmental and social issues, a survey by McKinsey suggests.
In the study, 37 per cent of CFOs, 56 per cent of investment professionals and 39 per cent of corporate social responsibility (CSR) managers thought that governance had become more important (see chart 2, below)
.
But only 14 per cent of CFOs and 15 per cent of investment executives and CSR professionals believed social issues were of greater importance than before the crisis erupted. Respectively, 9 per cent, 21 per cent and 20 per cent said environmental concerns were more of an issue.
Thirty-seven per cent of CFOs thought social programmes were less important at the moment, with 45 per cent taking this view on environmental projects, compared with 48 per cent and 51 per cent for investment professionals and 14 per cent and 9 per cent for CSR professionals.
Overall, 64 per cent of respondents thought the impact of governance programmes would be positive in the short term, compared with 37 per cent for social projects and 29 per cent for environmental initiatives.
But in the longer term, environmental programmes were seen as the most likely to influence shareholder value, with 85 per cent seeing them as a positive move, as against 84 per cent for governance projects and 74 per cent for social schemes.
www.mckinseyquarterly.com
SUPPLY CHAIN PRIORITIES
Supply chain executives see cost containment as their number one responsibility to the business and are more effective at this than revenue-driving or growth-related activities.
An international survey by IBM found that two of the top three priorities rated by respondents as either very or critically important were cost-related. Eighty-nine per cent saw continuous process improvement and cost reduction as second only to the alignment of supply chain and business strategies (see chart 3, below), cited by 91 per cent.
These were also the activities at which executives felt they were most effective, along with business performance management, which was seen as very or critically important by 81 per cent.
But executives thought they were less competent at other growth-related activities or programmes that were seen as less important. Respondents felt they were very ineffective at running external integration and visibility projects – seen as important by 70 per cent – and only slightly better at developing the supply chain as a revenue growth driver (56 per cent).
www.ibm.com
ECONOMIC CRISIS
Many companies in good financial positions are failing to take advantage of the economic crisis, a study of CEOs, C-suite executives and corporate managers by Booz & Company suggests.
The survey found that although 42 per cent of strong and 45 per cent of stable companies were acquiring assets or other firms, 21 per cent of both groups were scaling back this activity (see chart 4, below) while 37 and 34 per cent respectively were only involved as much as they had been before the recession struck.
Similarly, 40 per cent of strong companies – defined in financial and competitive terms – and 35 per cent of stable (strong financially but weak competitively) firms were investing in new products, but the remainder were only doing so either the same or less than they had done previously.
“They may be hesitating out of a concern that there will be no external financing available for M&A or that their acquisition moves, if not absolutely rock solid, will be disproportionately punished by a skittish stock market,” the report said.
The research also claimed many respondents from all companies were sceptical of
the plans for the business being put forward by senior executives, with 34 per cent of
C-suite respondents and 51 per cent of managers who didn’t report directly to the CEO expressing doubts.
Over half (53 per cent) felt that the structure of their industry would change dramatically as a result of the crisis.
www.booz.com
ELECTRONIC PAYMENT
CFOs are turning to electronic payment systems in a bid to reduce processing costs during the recession, according to research by Aberdeen Group.
Fifty-seven per cent of CFOs said automating the accounts payable process was their preferred means of cutting costs. Over half (51 per cent) of best-in-class companies now receive invoices electronically and 43 per cent pay electronically. This compares to 27 per cent and 34 per cent of other organisations.
Reported benefits by CFOs already using e-payment included cost reductions (79 per cent), lower payroll costs (77 per cent) and fewer errors (73 per cent).
www.aberdeen.com
