Financial Management Challenges Financial Management Challenges In perfect competition markets, financial managers have to ensure the organization is dependent on this economic paradigm. This is the manager’s organization is largely based on the general hypothesis of overall equilibrium (Belo-Osagie, 2012). Another challenge for financial managers in perfect competition is sacrificing any likelihood of a realistic evaluation of the economy. This is because financial managers find it hard to neglect perfect competition as an invented model all for greater realism. A third challenge is the ethical hazard and too much risk-taking posed by perfect competition markets.
Financial managers have to meet the interests of shareholders irrespective of the lack of advantageous potential (Etro, 2010). As a result, financial managers have rich incentives to partake in activities that have high returns but low success and ethical standards. Market liquidity affects financial managers through corporate responsibility. One cannot stress corporate responsibility today. The vital part in overseeing financial capital is necessary in sustaining the organization’s daily activities. In a perfect competition, making sure these activities are smooth and meet the company’s obligations is challenging (Etro, 2010).
Competitiveness affects financial managers through the end-of-period problem, which comes up when employees know exactly when the organization will repeat a repeated financial approach. During this problem, employees might compare the advantages arising from shirking to the expense of losing their work. Lastly, efficiency affects financial managers in the end because of its relationship with the organization’s investment (Belo-Osagie, 2012). This relationship implies that the manager’s firm has a rich incentive towards bettering its efficiency output. In addition, the organization has to undergo immediate developments in efficiency that is most likely the product of supervisory effort. Challenges financial managers today face in monopolistic competition includes the budgets of promotion and branding and the principle-agent issue.
Promotion and branding in monopolistic competitions face numerous concerns of harm to customers and the community (Belo-Osagie, 2012). Consumer groups and researchers argue that promotion and branding prompts customers to purchase more commodities and pay for numerous services because of the name of these products and services. Working through these concerns is challenging for financial managers. Secondly, the principle-agent issue largely occurs within huge companies where ownership and management rests on different individuals (Etro, 2010).
In a monopolistic competition, disputes between agents and managers often arise that usually compel company owners to build methods of monitoring and inspecting the performance of agents. Financial managers are usually in charge of these methods. Market liquidity affects financial managers in a monopolistic competition through the position of stocks at a conventional national stocks exchange platform. Such positions usually end up in costing the firm extremely high charges. The financial manager of such a firm has to respond to these positions and costs immediately and determine a way of reducing them or preventing further financial harm to the firm.
The situation is likely to adjust with the abolition of the concentration rule under a monopolistic competition (Belo-Osagie, 2012). Competitiveness affects financial managers under a monopolistic competition through data markets. Competition within information markets enhances market liquidity in a monopolistic competition, which consequently appeals investment variety. Lastly, efficiency affects financial managers in a monopolistic competition through the many relationships and compromises among competition, economy performance, and access to funding, consistency, and growth (Etro, 2010). Two key challenges financial managers face in oligopoly are scale and new technology systems.
Even though an organization might have adequate branches across a country, this national presence is not enough for winning many new client businesses. Scale in oligopoly always makes it hard for financial managers to acquire new clients because such a market considers national presence a feature of scale (Belo-Osagie, 2012). The second challenge, new technology systems, causes financial managers to look past client bids and determine any concealed intentions. Market liquidity affects financial managers in oligopoly when the organization’s national presence is trudged by the partnerships it planned to apply as a consolidation mechanism that can expand rapidly.
Competitiveness also affects financial managers through national presence in oligopoly. Lastly, efficiency affects financial managers in oligopoly through the allocation of resources and encouragement of concentration (Etro, 2010). Losses of efficiencies occur from trudged partnerships between the organization and its clients or bidders. The inefficient allocation of resources and concentration characterize oligopoly. These characteristics make it hard for financial managers to determine the income of shareholders, which leads to inequality within the firm. In brief, challenges faced by financial managers in a monopoly and a monopolistic market are relatively similar.
Financial managers cannot choose their clients in a monopoly. This challenge is a predecessor of the failure of other monopolies in other sectors of the same economy. Financial managers also endure cases of fraudulence because of poor management in other departments. Lastly, solvency always poses a risk for financial managers in a monopoly. References Belo-Osagie, H. (2012). Financial Management Digest: Emerging Risk Management Challenges. Journal of Financial Management & Analysis, 25(1), 91-94.
Retrieved from http: //search. proquest. com/docview/1115574155?accountid=458 Etro, F. (2010). Endogenous Market Structures and the Optimal Financial Structure. Canadian Journal of Economics, 43(4), 1333-1352. Retrieved from http: //search. proquest. com/docview/12873278203?accountid=458