Monday, 29 June 2015

From Leaders to Pleaders - A Greek tragedy

How does a country from being at the fountainhead of philosophy, mathematics, science, astronomy and intelligentsia find itself on a slippery slope (no pun intended) - This is story of Greece, as its economy along with its plethora of knowledge seems to be heading towards an abyss.

This is not the first financial crisis in the past couple of decades to impact Europe but the very magnitude and the lack of initiative on the part of Greece primarily and the European Union is in itself very baffling. One does not begin firefighting when the raging fire has burnt everything in its path.

Corporates across the world have to learn from this crisis as there are many parallels here.

1) When the writing is on the wall - Read.

Many corporates like Greece are in denial of the looming threat but ignore it at their own peril. Call it arrogance or ignorance but many a wildfire have been stopped in its tracks by pouring just a cup of water at the right time. Corporates should have a risk recognition and mitigation mechanism that puts out these small fires as soon as they manifest.
Performance measurement is the key - Countries should watch their GDPs and Corporates their fiscal, operational and financial performance.

2) There is no such thing called over governance.

There is either governance or no governance anything in between doesn't make any sense. Setting policies, procedures, practices that work and realistic are critical. A vision statement that endears itself to the masses but cannot be practically executed or implemented makes no sense. Same goes with an Operation Manual or Standard Operating Procedures that are neither standard or operational. The good-to-have feeling, whether it is from a Corporate Governance or governance of a nation, has no place in the real world.

3) Pay attention to your finances.

Greece like many corporates of the day would definitely have planned to change the world but did they have enough gas in the tank to go the distance or for that matter knew who would be funding them at the pit stops is a key question.

The CFO and the Finance team are the last people to abandon ship but if there is a sudden flight of talent from this team the warning bells should sound.

Another important point to note is not to raise or take money more than you can spend - this in my opinion is the real funny money. Corporates that are not fiscally intelligent do not know what to do with this excess cash - they land up buying a whole amusement park when all they needed were two passes. Thrift, frugality and spending within limits are not necessarily bad terms.

Bloomberg Business had this to say in 2004 - "With public debt totaling €168 billion in 2004, it’s clear that the Olympics alone did not bring about an economic collapse. Yet the Athens Games epitomized the structural problems that bedeviled the country for decades. It’s not just a question of how much money was spent on the Olympics, it’s also how it was spent and where it came from. After a period of austerity to tighten up its finances and qualify for euro entry in 2001, the Greek government loosened the purse strings once it entered the single currency. The games were just one of several areas where public spending was unchecked and funded by unsustainable borrowing"

And just for the record the Games cost them - €9 billion

4) Don't anticipate a bail out package.

Much to the chagrin of the European Union, Greece always believed that they would be bailed out yet another time. The very word "bail out" is temporary in nature and is not a permanent solution. One does not borrow more to make the situation any better. Corporate policy measures should be austere by design so that austerity measures are not warranted.

When you borrow either via the debt or equity route, the responsibilities are greater. Any country or corporate that does not have a repayment schedule in mind as well as a methodology to do that is plain irresponsible.

5) Imprudence is also globalized.

Gone are the days where a country's economy was insulated and did not impinge the economy of the other. In a globalized economy, the smallest of financial imprudence or misfeasance has a cascading effect. The bourses outside of the European Union are also impacted.

The sub prime crisis brought out a very interesting facet of the banking mechanism - I have a loan but do not really know who the lender is. The IMF and European Banking System are the first in the list that would go after Greece but where did they in turn borrow the money to fund Greece in first place is the key question - This is where the Asian, US and other economies are impacted.

Just as banks have their Know Your Customer (KYC) norms, corporates should have instill a parallel Know your Lender norms - a transparent process where the Board is aware the quality of the lender and the money, how integrated they are with the business and how much is their desire to facilitate growth - These are key parameters in mitigating the risk associated with raising and utilizing funds.

Another key aspect is for corporates to learn from the peers in the same vertical. Repeating a mistake that caused a loss to a peer is unpardonable as it just means that the company is so obsessed with itself that it ignored something that the competition burnt its fingers with.

6) Then there is the stakeholder - who generally finishes last.

Greece forbade its citizens from withdrawing more that €60/day initially and in a sweeping stroke then shut shop of its banking system for 6 days. So the stakeholders, in this case the citizens are bearing the brunt of fiscal and economic stupidity of the country's leaders. And at the end of the day - who's money it is anyway - the people's.

Corporates on the other hand, when they choose to resort to similar tactics, generally lose its customers, the confidence of its investors and shareholders and has a far reaching impact of its very existence. Corporates in these instances literally get away with murder and the stakeholders are left holding a bag - all because they chose to back the organization that they believed was destined for greater glory.

These situations are best avoided by adopting a combination of prudent policies, transparency, proper governance and fair fiscal and financial practices. In summation there is no substitute for common sense - Well at least there is no app for that as of now.

(This blog post is authored by Venkatesh Nagarajan, Co-founder at SansPareil -

Monday, 8 June 2015

Hire that finance guy...Now.

It is but natural that any startup or early stage organization wants to conserve cash, minimize spend and tread the path of extreme frugality at least till the time they are bootstrapped.

A typical founder group would, in addition to product development, customer acquisition and service delivery, generally tend to distribute and carry amongst themselves the additional load of operations and finance functions. While the move could be thrifty it may not necessarily be a smart and effective use of the leadership team's even more scarce resource - Time.

More the time that the leadership team spends on managing the so called "non-core" activities, the greater is their distraction from achieving the goals of the organization on committed timelines. Such distractions are not only a thief of time but in a world of extreme competitiveness may impinge the very existence of the organization.

It is always better to leave the work to the experts, however easy it may seem on first glimpse. Would you for a minute, have your CFO do the coding for your new SaaS product? or for that matter have your book keeper oversee your mission critical manufacturing parameters? The same fundamental logic applies for Finance and Operations as well - Leave it to the experts.

Most of the off the shelf accounting software comes with a sales pitch that says that it could be used by dummies. Then it is their sales pitch. Probe them with questions around compliance with Revenue recognition, Accounting Standards, IFRS and other associated finance and accounting promulgations and requirements  and that is when you will realize that you will need more than a dummy to meet these requirements. I am not for a minute stating these cant be learnt but why not focus on your strengths rather than dilute your precious time away from the significant.

Then we also have yet another group of entrepreneurs that have abjectly no or very less superintendence over the financial numbers. This is the other end of the spectrum and is an extremely scary and risky proposition. A panacea to this would be set up a monthly review process of financials and operations and understand the financials, the burn rate and how much is left in the tank. Understandably it will not be a quick process to learn but when guided by a finance professional there is a sense of assurance. Measure- should  always be the mantra.

When the time comes for an external investment arises both these groups are left grappling with either an incorrect set of financials or with no or limited knowledge of what goes on in the financial space. The power to negotiate a better deal with the investor communities is lost as a result of this tardiness.

Oftentimes, I am confronted with the question - When do I hire that rock star CFO? My answer is always simple - Not Now. You will know when. But hire that finance guy...Now

Your finance team just like any other team in the organization grows by need and there will come a time when you would need that rock star CFO to interpret and articulate your thoughts, ideas, developments, aspirations and goals into financial terms and relay the same to the investor community and stakeholders.

Till you attain that stature - That finance guy will keep your financial statements in order, squeeze the maximum out of every dollar, will be on top of all the compliance requirements and ensure that the organization is not subject more financial burdens by way of penalties etc. In summation, there will be someone competent in your team that will watch over your finances while you build that thing that is going to change the world.

(This blog post is authored by Venkatesh Nagarajan, Co-founder at SansPareil -

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Saturday, 11 April 2015

Why implementation is more important than strategy itself

Companies in the present day expend, both monetary and non-monetary, resources in development of corporate strategy. Most corporates believe that the strategy document/ dossier is the panacea for all its challenges and view it as be all and end of all of everything.

While development of a corporate strategy vision document can never be understated, it is imperative that strategy encompasses the virtue of implementation. There are no “one size fits all” or “cookie cutter” approaches when it comes to strategy. The paucity of time and in some cases lack of clarity forces organizations to adopt a strategy based on someone else’ experience than what is relevant or appropriate for them. A wrong choice of strategy and messier implementation results in precious/scarce resources of the organization being deployed in unfruitful forays.

Organizations should pick a strategy that is realistic, practical and best suits their way ahead. It could be a revenue goal, a product development/service offering goal, a profitability goal or a sustenance goal. The next step is to assimilate and build ways and means to achieve these goals. This is where the process of clear goal setting, implementation and measurement of results comes into play.

Goal setting process, which in more ways than one is the start of the implementation phase, has to involve all relevant stakeholders as they need to be aware as to how the end purpose will be achieved from the start. Often times, too little or only sketchy information about the ways to the means is shared which results in lack of clarity about the approach to the goal.

The essence of a good implementation is clarity of purpose, optimum utilization of both monetary and no-monetary resources, clearly defined timelines, yardstick for measuring performance and finally a clear feedback mechanism. Many a good strategy have not borne desired results as it gets lost in translation of purpose.

For an implementation to be effective there are certain elements that are non-negotiable:
  1. People – Both internal and external should be judiciously chosen and roles defined.
  2. Simple & Straightforward – The implementation process must pass the test of basic understanding. Jargons never get things done as much as plain speak does.
  3. Resources – Apt allocation of monetary and non-monetary resources
  4. Time – Adherence to SLA’s and pre-defined timelines are a very critical component
  5. Measure – A maniacal focus on measuring outcomes, results, hits/misses etc., so that appropriate course corrections can be made immediately.
  6. Leader/Champion – Not necessarily the top honcho but someone who has the ability to make it happen and work with diverse team members. Many organizations make the mistake of identifying the leader first and then the aforementioned. A “horses for courses” approach works best for getting the best results.

For an implementation to be successful, it has to be a democratic process wherein feedback, questions, criticisms etc. are to be viewed in the larger interest of the strategy to be executed rather than it being based on the management position of someone who is offering the feedback or opinion is occupying. In most organizations this is a key issue when it comes to deployment or implementation of strategy.

In conclusion, any great strategy on paper is as good as how well it was finally implemented and executed. Strategies are but intentions that definitely do matter but its proper implementation that makes all the difference between effectiveness or the lack of it.

(This blog post is authored by Venkatesh Nagarajan, Co-founder at SansPareil -

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Thursday, 9 April 2015

What is your organizations' risk appetite?

How calculated are risks?
Understanding the unknown :
Calculated risks are an oft repeated term that organizations resort to in day to day operations and business. But how calculated are these risks and what is the risk appetite of the organization?

Risk, by itself, in more ways than one is generally perceived with a negative connotation. In order to understand the gamut of risk from a business perspective it is essential to demystify "business risks" from those risks that a business exposes itself due to inaction or ignoring the obvious.

Risk appetite, when properly articulated, is both a measure of identifying and mitigating risks as well as enhancing the overall organization's performance and competencies.

In summation, risk appetite may be defined as extent or quantum of risk an organization is willing to undertake in pursuit of its strategic goals. There is no "one size - fits all" when it comes to risk appetite and as a rule is "tailored to suit".

Tenets of risk appetite :
The organization, in general, has to go through the following steps in sequence :
  1. Define Strategic goals/objectives - What will the organization go after - Revenue growth, Profitability, Return on Investment, Geographical expansion etc. This is most crucial step in determining the risk appetite of the organization.
  2. What is the ask?- How the organization needs to recalibrate and reposition itself from a risk taking ability standpoint by utilizing both its monetary and non-monetary resources for attaining the objectives. .
  3. Risk thresholds & tolerance - It is of prime importance that the organization evaluates and determines its risk threshold and tolerance. An ill designed threshold could result in more damage than benefit. Organizations have lost it all when they did not know when or where to stop.
  4. Effective communication - It is not enough if a risk appetite document is created and circulated with the Board. For it to be percolated and implemented in spirit, the do's and dont's, the thresholds and operational paradigm are clearly articulated across the length and breadth of the organization.
  5. Accountability - It is imperative that accountability is the cornerstone for risk taking and risk appetite of an organization as it is likely to expose the company to a path less traversed and hence the business should build appropriate accountability and responsibility metrics in defining its risk appetite.
  6. Measure - A sustained review process and mechanism for measurement needs to be instituted for measuring outcomes, results, hits/misses etc., so that appropriate course corrections can be made immediately.
In order to harness the benefits of calculated risk to propel the organization in the direction of greater glory, it is essential that corporate behavior and responsibility are consistently reinforced.

The corporate environment should foster and encourage the stakeholders to bet on the company to constantly review and increase its risk appetite for the greater good. Greater the risks better the rewards, so long as the risk appetite is clearly defined, deployed and implemented.

(This blog post is authored by Venkatesh Nagarajan, Co-founder at SansPareil -

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