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FINANCE
DARANA CHUDASRI
Net cash flow represents one of the most important factors for determining company value, according to Thanong Bidaya, a former finance minister and banker.
For investors, cash flow was a better judge of a company's prospects than profit growth or price-to-earnings ratios, he said at a conference at the Stock Exchange of Thailand yesterday.
While share valuations and profit figures can be ''adjusted'' through accounting practices, net cash flow was was one of the most elemental measures of the health of a firm.
Dr Thanong, who served as finance minister over a decade ago during the 1997 economic crisis and later during the Thaksin Shinawatra government from 2005 to 2006, said that in today's globalised economy, administrative systems were not a significant obstacle.
Investors and business leaders should instead consider religious conflicts, social inequality, global insecurities, oil and food prices as the major risks for the near future.
''Chief financial officers need to consider four key financial risks _ stagflation, volatile global fund flows, exchange rate policies and the weaknesses of the Thai financial system,'' Dr Thanong said.
The former president of Thai Military Bank said regulation of Thailand's financial sector needed more thought because of different operations and objectives of commercial banks, non-bank consumer finance companies and state-owned, specialised banks.
Dr Thanong said the six to seven commercial banks that aspire to be ''universal banks'' and provide a full range of financial services to retail and corporate customers may be too many for the country. Instead, consolidation into two or three larger banks may be the better strategy to allow Thai financial institutions to compete with their international counterparts, he said.
The government should also divest its holdings of smaller, ailing institutions to reduce public costs and allow the market to function freely. Another alternative would be to consolidate small, failing banks with other state institutions and run them as specialised banks.
Dr Thanong said effective CFOs need to be well-versed in all business aspects, not only finance and accounting.
''Future CFOs are not only assistants to the chief executive officer. They must try to create value from all parts of the business,'' he said. ''Financial risk and business risk are not separate issues. Both are integrated, and a CFO must be concerned with both.''
Veeravat Kanchanadul, a senior executive vice-president of the agribusiness giant CP Group, said maximising capital and investment returns was central to the role of any CFO.''The CFO must be more concerned about managing their company's assets than their own,'' he said. ''You are managing the money of your shareholders, your trading partners and your creditors. You can't think that this isn't your money, and you can do with it as you please.''
Naris Cheyklin, a senior executive vice-president with retail developer Central Pattana Plc, said a CFO must focus on value-creation and cash flow for his company to maximise overall efficiency and performance.
''Discipline is a very important trait for any CFO. You have to be able to say to other executives that the company is at the edge of a cliff. You must be willing to take a stand,'' he said.
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