Nothing ventured, nothing gained

LAHORE: There is lull in investment as private sector is not prepared to take any risk as the bureaucrats are sitting on the decisions for they do not want to be haunted by National Accountability Bureau (NAB) and as result economy is idling.

Risk management should be the integral part of any strategic management plan. The strategy should be based on good governance and ethics. Sustainability and corporate responsibility should be part of that strategy. Decisions taken by corporate or business leaders could backfire but if taken with the parameters of stated strategy of the enterprise or department the blame should not be passed on to the decision-makers.

Pakistan, at present, is paying a very high price of indecision at the bureaucratic level. The businesses, similarly, are not taking the challenges head on. The population is increasing and the highest consuming class’s age group is increasing more rapidly. We have seen that during the boom periods almost all industries operate at full capacity. During lean periods these industries have to prune production owing to a decline in demand. When the growth cycle reemerges the operating industries find it hard to cope with the market demand even after firing on all cylinders. This is because during the lean period millions of new consumers emerge but owing to resource constraints are unable to buy goods and services.

When growth restarts the existing consumers along with the newly added ones keep the demand high. To increase supplies the domestic industries need time and finances, thus supplies are increased through imports. The foreign suppliers seeing opportunities in Pakistani markets keep their margins low and capture a substantial share of the market. This again discourages domestic investment.

We are producing split air conditioners, refrigerators, television sets, and microwave ovens – all of good quality. Still the imports of these appliances continue as some brands have created a brand loyalty in Pakistan when they were introduced in the periods of shortages.

Ceramic tiles are being produced in Pakistan since its inception and the entire raw material is local still Chinese and other products dominate the local market. The high premium of cars forced past governments to allow used cars imports, which captured 30 percent of the local market before their imports were banned. Such inroads, made by the imported products in Pakistani markets, speak volumes of flawed national and industrial planning.

No strategy is without risk but a prudent strategist envisages all risks and the strategy to mitigate it. Doing nothing would not resolve the problems and all decisions carry some risk. Look at a ship for which the safest place is harbour. However the mandate of a ship is to transport goods and passengers. When it moves out of seaport it runs the risk of encountering many dangers.

The captain takes all safety measures to keep it sailing as a ship is an asset and is useless if it idles at the port. In the same way no business, be it government or public, is risk-free. Here the role of financial chief become critically important as it is his/her job to focus on mitigating risks knowing well the rest of the management is bent upon increasing them. This is the reason the most successful enterprises have services of best financial experts and they are disliked by the most of the employees.

The role of finance managers in the government is even more important. Capable and prudent financial wizards make sure all government allocations are result-oriented and in the best interest of the country. They promptly release funds for high-cost mega projects and ensure their fair and judicial use.

Red tape in finance department of the government is a curse for the nation as it increases the cost of projects appreciably. Take for instance the payment to be made to the people that are likely to be displaced by the construction of Basha Dam. After reaching payment agreement with the displaced persons the government delayed the disbursement of payment for several years. By the time the payment was available the cost of living increased and the actual compensation was 10 times higher. Even the donors raised eyebrows on such huge compensation. Had the payment been made on time and the land secured the nation would have saved billions of rupees.

The business plan and strategies formulated by the financial wizards of the nation or company should be based on ethics and good moral values. He should articulate a vision that is inspiring and morally good. The planners should understand that no great achievement has ever been achieved without a strong vision based on strong values.