The changing role of financial managers in Lebanon: The case of BHV

Mgmt 310: Management of organizations

Copyright 2011 All Rights Reserved

ABSTRACT
The following paper will discuss the shifting role of financial managers in Lebanon. It will begin by an explanation of the role of financial managers and the difference that lies in their role between adopting the traditional and modern approach with respect to the designated

functions. The company under study in this company, BHV, is currently one of the top department stores in Lebanon. Being a franchise to a foreign company, BHV has been faced by several obstacles in their finance department between customizing their processes with the Lebanese market and the French market. This paper will begin by providing an overview on the role of financial managers, an introduction on the BHV department store, a word provided by their finance manager, and finally a set of recommendations.

TABLE OF CONTENTS
Abstract .......................................................................................................................................... 1 Table of Contents .......................................................................................................................... 2 Section 1 ......................................................................................................................................... 3 An overview over finance and finance managers....................................................................... 3
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1.1

Introduction:.................................................................................................................................. 3

Section 2 ......................................................................................................................................... 6 BHV lebanon .............................................................................................................................. 6

2.1 Overview on BHV: ............................................................................................................................. 6 2.2 Meeting with finance manager of BHV: ............................................................................................. 7

Section 3 ......................................................................................................................................... 8 Analysis .......................................................................................................................................... 8

3.1 Analysis: ............................................................................................................................................. 8

Section 4 ......................................................................................................................................... 9 Recommendations ......................................................................................................................... 9

4.1 Recommendations: .............................................................................................................................. 9

SECTION 1 AN OVERVIEW OVER FINANCE AND FINANCE MANAGERS 1.1 Introduction:

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Finance as a term is defined as the process of allocating, managing, gathering and using money and other assets. It is a vital component to any business since all new firms need capital funding to initiate progress and survive. It also helps firms to identify their financial position according to the industry in order to maintain their competitiveness, sustain their growth, take important business decisions, and achieve long term business plans. All these business transactions are conducted though the companys finance department under the watchful eye of financial managers. Historically, the financial managers role has mainly consisted of counting the beans. Recently, institutional performance pressures have changed the financial manager from number cruncher and corporate policeman to information manager and business advocate (Barsky et al. 2000). Nowadays, they are available for work in both the public and private sectors and are considered to be a factor in assessing the strength and weakness of the institution due to the significant function that they play within the organization. Therefore, almost every firm, government agency, and other type of organization have one or more financial managers (Bureau of labor statistics, 2008). Their objective is not only limited to the maximization of the stockholders wealth but they also protect bondholders interests, maintain cordial relations with the society and follow the financial markets (Damodaran, 1999). They help customers take financial decisions by providing them with advice and overseeing the budgets of the companies they work for. Therefore, they control and analyze financial reports including income statements, balance sheets, profit and loss account, cash flow statement and other operations; evaluate the performance of the company through financial ratios, forecast the profitability of the firms investment activities and provide suggestions to CEOs that help them make sound judgments and take decisions. In addition, they act as middlemen between potential investors and the firm

because they are the central in the flow of money from investors into the firm and then back to those same investors (Ewton, 2006) and they use the resources available in the company in an efficient way in order to protect resources from waste, fraud and misuse (Gitman, 1987). Financial managers are assuming different roles within their organizations especially as the approach towards globalization is getting at a faster pace. Below are the activities related to their job descriptions (Wetson and Brigham, 1990): Forecasting and Planning: cooperate with other managers within the organization so they can evaluate the current situation of the company and take appropriate decisions concerning the firm. In order to make competent choices they should meet regularly, present suitable plans and organize the procedures that must be used when applying these plans. Consequently, financial managers as well as other directors are responsible for the future position of the firm. Investment and Financial decisions: finance managers are in charge of taking investment decisions of the company so they can raise the capital required to achieve long-term growth. As for financing these investments, they must also identify the kinds of funds (internal vs. external funds) needed to execute these investments. Coordination and Control: financial managers must coordinate with other managers to decide on the required methods to make the company function in a well-organized and efficient way. In this way, they can jointly analyze the actual performance of the company and control the employees contribution to the firms Interactions with Capital markets: to make proper investment decisions and to support the growth, financial managers should also be updated with the money and financial
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markets since they are expected to continuously analyze the source of their funds and the market they trade their securities in. hence, they should evaluate the markets that may affect the welfare of the firm they work for. Risk Management: every firm is subject to different kinds of risks such as credit risk, interest rate risk and foreign exchange rate risk. Financial managers responsibilities also include managing and indentifying the companys risks and hedging them with a professional way (Brigham & Houston, 1998).

SECTION 2

BHV LEBANON 2.1 Overview on BHV:

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The BHV Department store is a franchise of the French Bazaar de l'Hotel de Ville. It was established as an inspiration from a European shopping concept. It practically offers its visitors everything they desire from clothing, cutlery and several other products. BHV today is found in the City Mall with a space of over 7,500 meter square with over 200 international brands. The concept of BHV was ranked to be of practicality and high efficiency and most Lebanese citizens made it a pit stop to head to whenever a certain need arises.

2.2 Meeting with finance manager of BHV:

Being a country with high political instability which in turn affects the financial status of the company, it is a difficult job to maintain an elaborated financial department needed to maintain the companys going concern. It is an actual challenge. Mr. Samir Semaan, the CFO in BHV is a person who believes that the traditional finance methods need to be applied in BHV after facing several macroeconomic events. His methodology of management is found to be reliable by the company hierarchy. He provides a good reliable balance sheet, saves the benefits of partners, shareholders, suppliers and provides assurance of the proper application of internal policies both financial and accounting policies. However, there are several activities that are not under his supervision. For example the computation of the P & L accounts are not a part of his responsibility since there is a system in charge of computing it and deals solemnly with data entries and controls presentation of financial statement. Then, the evaluation of the companys performance depends on the application of the budget in comparing the actual results with the previous ones in order to encourage competitiveness. In his opinion, the role of Lebanese financial managers is considered to be at a lower level than the worldwide managers since they have the same standards but they are not using all their qualifications. He also mentioned that he

has a minimal power to take decisions but also has limitations. A committee for instance, has to approve of any risky operations to be taken bearing in mind the fact that not all committee members are graduates of finances or have sufficient experience in the worldwide and Lebanese financial markets.

SECTION 3

ANALYSIS 3.1 Analysis:

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Financial managers role changed from one period to another and nowadays, many functions are added to their day-to-day activities such as making investment decisions, managing the risk, being in contact with the financial market etc Therefore, increasing shareholders wealth and maximizing the value of the company are not much considered from the major purposes of financial managers since there are other roles that they should depend on and follow in their jobs. The Lebanese financial managers role is still following a traditional approach since their main contribution to the company is mainly focused on maximizing shareholders wealth through taking decisions in that domain. In Lebanon on the contrary, financial managers are urged thoroughly to maximize shareholders wealth but with no right to take any decision solemnly. The upper management in Lebanon abuses their positions and uses it for their personal benefits. The first reason for the cause of any thrift or fraud results from the financial department and it is a common act in Lebanon. The role of the Lebanese financial managers can be summarized in the points below: Formation of new firms Issuance of securities and increasing stockholders wealth Raising capital Maximizing profits and increasing stock prices Analyzing the balance sheet SECTION 4

RECOMMENDATIONS 4.1 Recommendations:

The Lebanese financial managers are facing a major challenge in their roles. Unfortunately Lebanese companies up till today are not accepting the international standards of the role of financial managers as it is and for that reason, they are not allowing the financial managers to conduct their work in a proper uniformed way. In my opinion, managers need to step up for their rights and roles and feel dedicated towards it by researching more and applying the modern tactics of finance. Some of the modern tactics of finance are listed below: Maintaining relations with the society Revealing information to financial markets and refrain from discretion Making the optimal mix of securities Giving acknowledgement for financial decisions Directing responsibility for the control process Forecasting and planning

The finance department of a company needs to be the most transparent department among all as it accounts for a big share of the companys succession. People are interested in viewing actualities and real numbers to be able to rank the companys market status and decide on their investment aim. The modern trend for finance needs to be employed especially in a country like Lebanon which was ranked the top one touristic destination & business strive to open a branch/franchise in it. Bibliography: Birgham E., & Houston, J. (1988) An overview of financial management. In Fundamentals of financial management pp. 2-28. 8th ed. Orlando, Dryden Press.

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Bureau of Labor Statistics, U.S department of labor. Occupational outlook handbook, 2008-09 edition. Retrieved April 23, 2011, from http://www.bls.gov/oco/ocos010.htm Gitman, L.J. (1992). Foundations of managerial finance. 3rd ed. New York, N.Y.: Harper Collins Gahala, C. (2005). What do credit managers do? Business credit, pp. 36-40 Nelson, W.H., (1995) Financial managers must think strategically. Healthcare financial management, 49(10)

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