Financial Management in a Global Economy: Emerging trends and best practices

The global economy is undergoing turbulence owing to the geopolitical crisis in the East and the West. Growth has slowed down across major economies, and energy-price inflation has been surging. This has had a far-reaching impact, especially as global trade has been impacted, adversely impacting the supply of essential commodities, most importantly oil. Energy price inflation has impacted the cost of production, cost of transportation, and overall profitability. 

Financial management decisions emanate from four major activities: operating, investing, financing, and dividend. Each has witnessed differing trends in the dynamic global market.

Digital transformation, big data, AI, and ML have created a plethora of new products that were not heard of before. These products can be quickly launched, are more efficient and positively impact the bottom line.  Cryptocurrency, blockchain, and crowdfunding are being used to mobilise/raise funds. As ease of borrowing and speed of borrowing have improved via digital platforms, borrowing costs for companies have partially reduced. Obviously, many companies want to avoid the conventional funding route and experiment with new ones. There has been a growth in ICOs for fundraising, which are not as regulated as the equity market but are faster to raise and a substitute for equity for new ventures.  

Since cash flows dwindled due to reduced sales, creating niche segments to improve the bottom line was essential. Vendor audits have become popular as businesses want to ensure that suppliers and buyers are reliable and meet their quality standards. AI-driven Inventory models are gaining popularity. Since inventory is a major component for manufacturing companies, managing it has a direct impact on the production cost, improving the operating profits. 

With an emphasis on sustainability, green finance and ESG companies are growing. Businesses want to invest in projects that are 'ecological-friendly' and hence get tax benefits to pursue this initiative. Recording carbon footprints lies in the nucleus of making investment decisions, as many countries have imposed a carbon tax that directly impacts businesses' costs.