There is no doubt that in the current economic environment some companies
are camouflaging their poor performance with some suspect off-balance sheet
shenanigans other dubious activities.
Directors
of many companies simply do not have the understanding of the mechanics or the
day to day activities of the business which they purport to run. This has been
especially true in the case of non-executive directors.
In
trading environments it is not uncommon that totally unrealistic profit targets
have been passed from Board level to trading departments. No cognisance having
been given to the disproportionate risks which need to be taken to achieve
these targets.
Some
of the most spectacular financial flame outs have followed a period of
ostensibly highly successful trading. In their desire to recognise these
“profits” no thought were given as to how they were being made. In such times
it would be well to take note of the old adage that is something looks to be
too good it usually is!
If
your company is bucking the trend in these difficult times it may well be that
you are implementing a winning formula.
However
history tells us that it is prudent to implement some rigorous analysis in
order to avoid any unpleasant surprises.
No comments:
Post a Comment