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Strategic

Finance
Management
Shiv Kothari
EDI
SFM
• The identification of the strategies capable of maximizing an
organizations net present value, the allocation of scarce capital
resources, and the implementation and monitoring of a particular
strategy.
• Strategic financial management can be defined as ‘’the identification of
feasible strategies capable of helping a business achieve its objective/
target, the allocation of scarce financial resources among competing
business opportunities and the implementation and monitoring of
chosen strategies’’. Please note that this definition is based on the core
assumption of finance – maximization of wealth
Strategy
• According to Professor Michael Porter of Harvard Business School, Fundamental to the success of any
company and to any effort to develop strategy is having a proper goal for business clearly in mind

• A carefully devised plan of action to achieve a goal, or the art of developing or carrying out such a plan

• Strategy is a course of action – including a blueprint of resources needed to get a desired result. The
combination of skills, tactics, knowledge and experiences that an entity (individual or corporate) uses to
achieve a specified objective is what we call strategy.

• A strategy can be short-term or long-term, depending on the time frame covered by a project or concern

• Questions you need to ask


• What future position do you aim to reach
• How will your organization will achieve its desired financial position
• Where are you now?
• How are you going to get there?
Finance
• Finance: the business or art of managing the monetary resources of an organisation.
• What future financial position should the organisation reach?
• How does it intend to get there?
• How does the organisation intend to manage the competing demands of spend versus
retain?
• Do the organisation’s trustee and management understand the primary statements?
• A good starting point of financial strategy should be the identification and formulation
of objectives. This starting point is obvious as strategy depends on objectives or
targets. Corporate objective can be financial or nonfinancial. Recent research has
shown that non financial corporate objectives are as important as their counterparts
Management
• the organising and controlling of the affairs of an organisation or a
particular sector of an organisation.
• Management in all business and organizational activities is the act of
getting people together to accomplish desired goals and objectives using
available resources efficiently and effectively.
• Management comprises planning, organizing, staffing, leading or
directing, and controlling an organization (a group of one or more
people or entities) or effort for the purpose of accomplishing a goal.
Resourcing encompasses the deployment and manipulation of human
resources , financial resources, technological resources, and natural
resources
Basic Functions
Estimating Funds Raising Funds Investing Funds

Operations & Means of Raising Making Investment


Working Capital Funds Decision

Liquidity Capital Project Portfolio


Management Estimation & Raise Management

Maximizing Profits & Shareholders’ Wealth


Investment Decision Financial Market & Security Analysis & Financial Risk
Institutions Portfolios Management
Investment Decision & Prospect Institutions in Financial Market 1. Security Analysis Financial Risks
Planning 1. RBI, BANKS, NBFC 2. Market Indices 1. Credit Risks
1. Evaluation of Project 2. Insurance Companies 3. Statistic Models (Moving 2. Liquidity Risk
(FUND/CASH FLOW) 3. Money Market Instruments Averages) 3. Asset Based Risks
2. Relevant Cost Analysis 4. Hedge Funds 4. Theories of Stock Market 4. Foreign Exchange Risk,
3. DCF & NON DCF Methods 5. Mutual Funds 5. Portfolio Management Market Risk
4. Capital Rationing
5. Social Cost Benefit Analysis

Evaluation of Risky Proposals Capital Markets Financial Derivatives


for Investment Decision 1. Primary and Secondary 1. Futures & Forwards
1. Investment Decision under Market 2. Options (Call & Put)
uncertainty 2. Optional/Convertible 3. Swaps and Swaptions
2. Effects of Inflation on 3. Rolling Settlement 4. Interest Rate Derivatives
Capital Budgeting Decision 4. IPO
(IRR/Profitability Impact)
3. Sensitivity Analysis

Leasing Decision Commodity Exchange Financial Risk Manaegemnt


1. Lease V/s Buy Decision 1. Regulatory Structure 1. Source of Foreign Capital,
2. Break Even Lease related 2. Agriculture & Non ADR, GDR, FCCB etc
determination Agriculture Market 2. Foreign Exchange Market
3. Cross Border Leasing 3. Exchange Risk on Capital
Project
Thank You
kotharishiv@gmail.com