ARE YOUR BOARD MEMBERS SAVVY WITH FINANCIAL TERMS AND EXCEL IN FINANCIAL LITERACY QUOTIENT AS PER COMPANIES ACT 2013 MANDATES.

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27 Aug 2020

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Time immemorial companies are getting stuck with the ROC requirements due to the failure of financial literacy in Board of Directors. It is very much mandatory and essential for a company to hire directors having suitable financial literacy quotient to foresee the challenges and financial hiccups and bottlenecks in advance and forecast suitable remedial actions to run the horse in the right direction and altitude.

 First and Foremost the Board Members must be cognizant of fluctuating Corporate Governance regulations and modifications, SEBI rules and regulations and be very thorough with the Companies Act 2013. A genuine financial literacy quotient of a board member can be fingered out by confirming whether the board meetings analyze the annual reports, audit reports, bank financial statements and other such ready reference reckoners.

 The Board of Directors can be considered as financial literate only if they fathom the number game and relevant metrics. They must be thorough with excel formulas and financial PowerPoint Presentations. In order to take a financial decision for a company, the directors need to analyze the financials from top to bottom and from every nook and corner. They must be in a well-versed situation to identify Balance Sheet goof-ups and Balance sheet window dressing.

 In-depth knowledge of Stock Market Index, GAAP accounting principles must be honed by the Board of Directors. Also, the all-pervasive GST and taxation matters need to be considered prudently by the board members before presenting as a director signatory for the company.

 The Satyam Scam is evident how low financial literacy quotient of Board members can ruin the future of the company. Every financial decision taken by the Board of Directors has to be determined from all financial angles and forefronts.

 Financial knowledge about Investment banking, merchant banking, mergers, and acquisitions is very much mandatory for the board as a company faces a lot of dynamic and unpredictable business conditions and cut-throat competition. It is the predominant responsibility on the part of board members to transform the unconducive business environment in too favorable and sustainable business opportunities for a long lasting survival and healthy goodwill of the company