BusinessCorporate FinanceFinance: have a confident approach

Finance: have a confident approach

British financial confidence is waining, but is all as bad as it seems?

Confidence is an important commodity ­ especially at the moment during the
ups and downs of the credit crunch and as the successive waves of
bad-then-good-then-bad news fill the pages of the national media.

The ICAEW’s last Business Confidence Monitor, published in February, showed
that confidence has plummeted to its lowest level since the survey began in
2003. In the first week of January over $5 trillion was wiped off the value of
public companies worldwide. Yet, if you look beyond London and the banking and
property sectors in particular, the story is different.

The message that came out of the institute’s recent meeting of FTSE 250 FDs
was that the wider economy has not yet been impacted. While some were beginning
to see signs of belt-tightening, the mood for the future remained optimistic.

Today, among all the noise and rumour that is going round the markets, one
thing is clear. All of those who contribute to a successful economy ­ banks,
regulators and businesses among others ­ will face greater scrutiny for their
actions, their business models and their financial performance. At such times
the accountancy profession, as well as wider market participants, have a key
role to play in helping restore balance in the system.

When confidence is lost or misplaced, it can take a long time to recover. By
being rigorous and determined in the execution of our roles, the accountancy
profession may be able to help ensure that the time taken for confidence to
recover is reduced. So, what are members of the profession doing in the context
of the current credit crunch?

FDs are spending considerable time thinking about risks in the context of the
changed business environment and being extra diligent in ensuring they satisfy
accounting requirements where liquidity and valuation are concerned.

Auditors are working with their clients to ensure that accounting
requirements are being met and that the implications of IFRS are fully
understood.

Recognising that, with low interest rates and high employment, the wider
economic landscape remains stable, investors should, in general, be taking a
long-term view.

While the current climate makes it almost inevitable that there will be
corporate failures ­ under a free market system it is impossible to eliminate
risk completely ­ our challenge as finance professionals is to help mitigate
this risk by ensuring that the quality of financial information available to
market is second to none.

Iain Coke is head of the financial services faculty at
the ICAEW

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