Like many of you I have been following with interest and astonishment the U.S. government’s efforts to manage the current financial crisis. $700 billion to help US banks rid themselves of bad debt after years of too much leveraging and bad loan practices. Fannie Mae/Freddie Mac awash with rotten assets with congressional oversight asleep at the wheel. Additional bailouts, for Citigroup announced just last week. On October 6th the US Federal Reserve announces plans to buy massive amounts of short-term debt from companies in an effort to unfreeze the money markets. On November 25th the Federal Reserve says it is to inject another $800 billion into the US economy in a further effort to stabilize the financial system. About $600 billion will be used to buy up mortgage-backed securities while $200 billion is being targeted at unfreezing the consumer credit market. Today, U.S. automakers drew fresh skepticism from lawmakers in a rocky confrontation over their pleas for an expanded $34 billion rescue package they say they need to survive.
Whatever happened to management following best practices in good times and in bad? What has become of business risk management, internal controls, planning and budgeting, working capital and free cash flow management, aligning incentive and compensation systems with goal achievement, strategic cost management, quality management, and improvement principles such as Six Sigma? While I am, of course, oversimplifying, and fully realize that it is never possible to avert the next economic or financial crisis, surely, best practices in these important disciplines were not adequately followed.
Highly competent and skilled management accountants, are vitally necessary now more then ever to help organizations create growth, manage risk, manage and predict cash flows, design and implement quality improvement systems, design and implement strategic cost management systems such as activity-based costing, implement internal controls, and much more. They should be trusted business advisors to CEOs, in good times and in bad and management needs to wake up a leverage their skills.