Why Your Organization Needs Financially Literate Decision-Makers in the Digital Age

Imagine that you are a manager at a mid-sized company, and you have been asked to make a recommendation on potential returns from a strategic partnership. You don't have a background in finance or accounting, but you know that the investment has the potential to bring in significant profits for your company. What do you do in such a situation?

All team heads have to take so many decisions, most of which have direct or indirect financial impact. As the business world becomes increasingly digitized and complex, everyone who makes decisions for their organization should have at least a basic understanding of finance and accounting principles.

As Peter F. Drucker, once said, "There is nothing so useless as doing efficiently that which should not be done at all."

A recent S&P survey on financial illiteracy indicated that 2 out of 3 adults worldwide, are financially illiterate. Now, when decision-makers don't have a solid understanding of finance and accounting principles, they are more likely to make poor decisions that expose their organization to unnecessary risk. And so - in all fairness - they should probably not be making any decisions at all, until they overcome their financial illiteracy.

Else the risk exposure to the organization may be immense.

For instance, they may sign contracts without understanding the financial implications. Or, they may neglect to properly factor in future expenses or contingencies. They may not make the right pricing decisions for their products or services. Expense management and resource allocations may be poorly thought out, leading to inefficiency and reduced profitability. Ditto for Capital allocation. Decisions on mergers and acquisitions, taken without understanding the numbers or financial statements, may turn out to have disastrous unanticipated consequences.

Exposure to such enormous risks can be greatly migitaged by investing in training on finance & accounting for all the decision makers in the organization. Such Training will ensure that unnecessary risk exposure is reduced, and also that well-informed, well-reasoned decisions will be made by their decision-makers.