In the view of the St. Gallen Centre for Financial Management, financial management includes much more than the company's focus on profits. Sales and cost management undoubtedly are an essential dimension of financial management. However, the income statement alone cannot always explain the success of a company. A company such as Amazon, for example, is not making any notable profit since its foundation but generates sufficient liquid assets from the operational business to fund an average growth of more than 20%. Meanwhile, Amazon has a market capitalization of more than USD 300 billion. To explain this situation, the components of financial success have to be reviewed more comprehensively.
Traditionally, in the German culture, a company's profit resulting from business operations over one period is paramount in financial management. In recent years, this one-dimensional view has been supplemented by working capital, i.e. management of accounts receivables, inventories and accounts payable. In the German-speaking area too, Cash Flow, a more comprehensive measure of success compared to profit, is increasingly used to analyse business operations.
However, many industries had to realise that today's healthy operating cash flow does not guarantee future entrepreneurial survival. Nokia is just one example where the good results of the past came to an abrupt end in the near future. We are at the beginning of the fourth industrial revolution and investments into the future need to address the ever-accelerating technological change. For us, financial success therefore always includes a time long-term component, which must be anchored in the company's incentive and reporting systems.
In our view, financing represents the final essential dimension of financial management. It has to support achieving the company's strategic goals and allow affordable access to the necessary liquidity.
These statements clearly show that we see a close connection between the company's strategic and financial management. The financial management is responsible for contributing to the implementation of the strategy. In this process, the company's organization needs to be taken into account. Organization theory states that the structure of the company follows the corporate strategy. The financial management follows the strategy and the structure. A profit center organization requires a different financial management than a functional organization. Financial responsibilities need to be defined with a view to the success of the entire company in order to enable the implementation of the corporate strategy. In a rapidly changing world, internal distributional conflicts must be avoided and the company's outward orientation strengthened. This is our key strength, thanks to our extensive project experience in various industries.
Thorsten Truijens, Dr. oec. HSG, MBA
Director of the Center for Financial Management at SGMI Management Institute St. Gallen
After studying in Germany, the US and in Switzerland, Thorsten Truijens started his career in the controlling department of a multinational automotive company before working for a consulting firm. As director of the Center for Financial Management at SGMI Management Institute St. Gallen the focus is on international corporations that value and count on profound knowledge of the continental European and the Anglo-American view on financial management and highly appreciate the practical approach. Furthermore, Thorsten Truijens has repeatedly presented lectures at various prominent international universities such as Harvard Business School on the topic of financial management. He also won numerous Best Teacher Awards.
His main topics include: