Business and Accounting After the Crisis

by Alex Malley, CPA Australia, 28 May 2010

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Management Risk Management

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CPA Australia GFC global financial crisis lessons

Now that global financial crisis (GFC) is waning, we’re seeing businesses return to their core areas of activity. They are concentrating on their core strengths and competitive advantage, looking at consolidation, and narrowing their focus.

We’re also seeing more emphasis on partnerships and collaboration. A good example of that can be found in the car industry, where a number of US and European companies joined forces, either one-off or on an ongoing basis.

Intrusive government

Post GFC, governments need to be mindful of imposing extra costs on businesses as they navigate some rough seas.

During the GFC, the way governments have reinserted themselves into the business and economic sphere was necessary, due to circumstances in which major institutions were either on the brink of collapse or actually collapsing with potentially disastrous flow-on effects.

However, there are questions around the viability of ongoing Government intervention. At the many meetings of world leaders on this subject, there has been much talk about imposing levies, taxes and so on to ensure against the excesses that created the latest crisis. Governments must not be heavy-handed.

Access to finance

The best way to achieving wealth and higher living standards across the community spectrum remains a healthy, dynamic private sector. And that means addressing some critical issues like access to capital, which was prominent among the challenges facing businesses over the past year.

This was particularly the case for the operators of small to medium enterprises. They found that the usual sources of capital had dried up due to a tightening of lending conditions. In addition, there was also a decreased appetite for risk on the part of banks and other financial institutions and an increased cost of borrowing.

Banks and other financial institutions should bear in mind the importance of access to capital for enterprises of all sizes and especially SMEs, which make up a large proportion of businesses. While there needs to be rigorous processes in place when assessing a company’s suitability for a loan, it should not be unnecessarily onerous. Businesses need a degree of certainty to enable them to make important capital investments to grow and develop new markets.

Lessons for business

Another issue businesses faced during the GFC was a general drop in confidence as many companies took a “wait and see” approach, putting on hold any plans for purchase or expansion, with some obvious flow-on effects.

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