1.

Critically Analyse The Functions Of A Financial Manager

1. Estimating the Amount of Capital Required:

This is the foremost function of the financial manager. Business firms require capital for:
(i) purchase of fixed assets,
(ii) meeting working capital requirements, and
(iii) modernisation and expansion of business.
The financial manager makes estimates of funds required for both short-term and long-term.

2. Determining Capital Structure:

Once the requirement of capital funds has been determined, a decision regarding the kind and
proportion of various sources of funds has to be taken. For this, financial manager has to
determine the proper mix of equity and debt and short-term and long-term debt ratio. This is
done to achieve minimum cost of capital and maximise shareholders wealth.

3. Choice of Sources of Funds:

Before the actual procurement of funds, the finance manager has to decide the sources from
which the funds are to be raised. The management can raise finance from various sources like
equity shareholders, preference shareholders, debenture- holders, banks and other financial
institutions, public deposits, etc.

4. Procurement of Funds:

The financial manager takes steps to procure the funds required for the business. It might
require negotiation with creditors and financial institutions, issue of prospectus, etc. The
procurement of funds is dependent not only upon cost of raising funds but also on other factors
like general market conditions, choice of investors, government policy, etc.

5. Utilisation of Funds:
The funds procured by the financial manager are to be prudently invested in various assets so
as to maximise the return on investment: While taking investment decisions, management
should be guided by three important principles, viz., safety, profitability, and liquidity.

6. Disposal of Profits or Surplus:

The financial manager has to decide how much to retain for ploughing back and how much to
distribute as dividend to shareholders out of the profits of the company. The factors which
influence these decisions include the trend of earnings of the company, the trend of the market
price of its shares, the requirements of funds for self- financing the future programmes and so
on.

7. Management of Cash:
Management of cash and other current assets is an important task of financial manager. It
involves forecasting the cash inflows and outflows to ensure that there is neither shortage nor
surplus of cash with the firm. Sufficient funds must be available for purchase of materials,
payment of wages and meeting day-to-day expenses.

8. Financial Control:
Evaluation of financial performance is also an important function of financial manager. The
overall measure of evaluation is Return on Investment (ROI). The other techniques of financial
control and evaluation include budgetary control, cost control, internal audit, break-even
analysis and ratio analysis. The financial manager must lay emphasis on financial planning as
well.

2. What Are The Various Sources Available To A Company For Raising Funds

1. Bootstrapping
The funding source to start with is yourself. Can you tap your savings

to start your business so you can keep all the profits and company

ownership? Sometimes that’s not possible and you’ll need to look

elsewhere.

2. Loans from friends and family

Sometimes friends or family members will provide loans. This approach

could possibly become negative if they lose money on the investment.
However, if the business succeeds, there can be a stronger bond formed.

3. Credit cards
Credit cards are usually the easiest option for getting money, but they
come with a high cost for the capital, since credit card interest rates
tend to be high. "The good news is that they’re flexible," says Rachel
Alexander, a small-business consultant. "You don't have to justify what
you're going to spend the money on." The amount you can obtain is
based on your credit limit, which is probably less than you’d get from a
bank or other loan type. Credit cards are a good source of capital for
small-scale revolving needs, and for entrepreneurs who want to retain
ownership and control of the company.

4. Crowdfunding sites

Online crowdfunding sites have become popular in the past few years.
They’re usually used to help businesses raise money to launch a
specific product. Crowdfunding can be time consuming and requires
putting information on the site, often with a video or photos of the
product. Crowdfunding can be a good way to pre-sell your products
and get the capital to build them, but you may use a lot of the money
on incentives to get people to sign up. Some crowdfunding sites only
let you access the money if you meet your fundraising goal, and the
site may take a percentage of earnings.

Bank loans
Getting a bank loan or line of credit can be more time consuming than

using a credit card, says Alexander. When you make your case to the

bank, you'll need to show that you have a history of paying back debt.

The bank will want to see a business plan and financial forecast.

"Understandably, the bank needs to know they're going to get paid

back," Alexander says. Banks provide several types of loans, including

some through the Small Business Administration. Some loans require

collateral in case you don't pay back your debt.

Angel investors

Angel investors are high-net-worth individuals who get an equity stake

in return for their financing. They expect to make a profit and usually

have business expertise they share with you to help your company

grow. Know that angel investors may scrutinize your business plan and

you'll have to build a case as to why they should invest, which isn't a

bad thing, says Alexander. The vetting process for entrepreneurs

should ensure that the business plan is solid.

Venture capital
 Like angel investors, venture capitalists take equity in your business in

exchange for financing. Venture capital funds resemble mutual funds

in that they pool money from many investors. Venture capitalists also

have business expertise in the areas in which they invest and will be

involved in running the business. In exchange for potentially large

amounts of money, you’ll cede some control and equity.

3. Over Capitalisation And Responsibility

Overcapitalization occurs when funds of a long-term nature (e.g., share capital, debentures,
and loans) exceed the amount of optimal capitalization.

According to Hoagland, overcapitalization can be defined as follows:

Whenever the aggregate of the par-values of stocks and bonds outstanding exceeded the true
value of the fixed assets, the corporation is said to be over-capitalized.

If capitalized optimally, a company will earn a good return on its investment. By contrast,
if is it overcapitalized, the company will have a rate of return that is lower than the rate of
return in competing firms.
Declining rates of return and dividend rates are strongly suggestive of overcapitalization. If
overcapitalization is an issue, the supply of long-term funds exceeds the required amount of
funds, or the economic activities of the enterprise decelerate.

Overcapitalization, in other words, refers to the underutilization of funds. That's to say, a

company is overcapitalized when its actual profits are not sufficient to pay interest and
dividends at proper rates.

For overcapitalized companies, total profit may increase but the rate of earnings will decline.

Idle Funds
The promoters of a company may issue more than the required number of shares and
debentures, and these funds may remain idle. Such funds will not earn a return, whereas
investing them may yield a high return.
The result of idle funds, therefore, is a lower rate of return.

Underutilization of Funds
A company's return is compromised when funds are improperly used. In particular,
underutilization of funds will yield low earnings, resulting in the decline of return per share.

Acquisition of Goodwill at Excessive Price

When companies are acquired, the company may pay for goodwill more than its net worth.
Goodwill is a fictitious asset that has no real worth.

Therefore, if excessive funds have been allocated to the acquisition of goodwill, a lower
amount of funds will be available for use. Consequently, the rate of return will decline.

Acquisition of Fixed Assets When Prices are Higher

An enterprise may have acquired assets at a time when it was very costly to do so. With the
passage of time, the price of these fixed assets, initially purchased earlier at a higher price,
may decrease. If so, the reduction in the real value of assets will reduce earnings.

Inadequate Provision for Depreciation

Depreciation may be charged at a lower rate when compared to actual depreciation. The result
will be a reduction in the real value as compared to the book value.

The reduction in the real value of assets will lead to low earnings and overcapitalization.

Excess of Rate on Loans over the Rate of Return on Funds

Sometimes, the rate of interest on loans received may exceed the rate of earnings on the
investment.

In such cases, companies will have to pay more than what was earned. The situation will result
in declining returns and, in turn, overcapitalization.

Higher Rate of Taxation

Higher taxation rates may consume a large portion of earnings and, in this way, deprive
shareholders of a dividend at a fair rate. This situation will lead to the overcapitalization of the
company.

4. Problems In Corporate Finance Planning

1. Disconnected Departments
Disconnected teams often lead to data silos which negatively affects your financial planning
as you won't have access to all the available information. Data silos most often occur in larger
companies that have several moving parts. Each department has its budget and goals, but
without proper communication and connected systems, those might not align with other
departments, which can cause contradictory strategies.

Disconnected departments can lead to:

Incomplete data: You can't see the complete financial picture of each department
Inconsistent data: The information you receive might not match the reality of the situation
Duplicate data: You end up performing tasks twice and overspending on the budget
Limited collaboration: Departments aren't able to work together towards the same financial
goals

2. Lack of Communication
Roughly 86% of employees say poor communication is responsible for most errors in the
workplace. In contrast, businesses with effective communication see an increase in
productivity by 25%.

A lack of communication will hinder effective financial planning as it prevents you from
aligning your financial goals between departments, learning each team's challenges and
addressing issues quickly to stay on track with the budget.

One example of poor communication in the workplace is long response times. If your
departments are looking for feedback or approval for spending, this can set them back in their
schedule. It might also cause departments to make financial decisions on their own to avoid
the wait time, which can cause an imbalance between your financial plans and actual
spending.

3. Limited Data

One of the most significant sources of data for planning for the future is looking at the
past. What worked the last few years and how can you build on that for the future and
prepare for potential changes?

However, that isn't possible if there isn't available data. This can occur when you're trying a
new business model, launching a new product or service or making another change that would
significantly affect your future financial plans.

In those cases, you might feel like your financial planning relies on guesswork or depends on
third-party research from other businesses that adopted similar models or changes. However,
no two companies are alike, so you're still left with many potential financial outcomes with
little data to guide you.

4. Poor Data Quality

Most finance professionals know the feeling of performing account reconciliation just to run
into a discrepancy. While minor differences are often easy to resolve, major ones can throw
your entire financial plan into disarray.

Discrepancies often occur because of poor data quality. For example, individual teams may
have recorded their spending in their accounting applications but haven't sent the data to the
finance department.

Another example of poor data quality is multiple errors. When you enter the same information
in various databases, there's a greater chance of introducing errors in the data, which will
cause inconsistencies with your numbers.

5. Too Many Manual Tasks

Repetitive manual tasks are when you complete the same action several times in a row, such
as inputting numbers into a spreadsheet, which has enough repetition and predictability that
you can program a computer system to replicate those same actions.

Not only do manual tasks take your team away from other essential tasks, but it also increases
your error rate. For example, errors can occur either during the initial data entry process or
when someone manually transfers that data between systems by re-entering the numbers and
information on a new spreadsheet.

The average error rate from manual data entry is 1%. However, that varies drastically
depending on the format of manual entry. For example, if someone is entering data from a
written form, there is a higher chance of errors. This is because when transcribing written
information, you must account for handwriting that's difficult to read.

6. Lack of Scalability
Your financial planning tools should grow alongside your business. For example, while a
traditional spreadsheet might have worked when you were a small business of fewer
than 100 employees, you will reach a point eventually when you can no longer perform
the same tasks on that spreadsheet.

Financial planners struggle with keeping up the same detailed financial plans while working
with outdated budgeting tools and software that didn't grow along with their business.
However, they also aren't ready to adopt new software because they are comfortable and
familiar with spreadsheets. This can cause delays, inefficient processes and errors.

For instance, if your business hired a dozen new employees over the next year, how easily can
you add those new payrolls into your financial plan? If you're working with outdated systems or
manual spreadsheets, it might be a very tedious task as you would need to adjust your
numbers and perform calculations by hand, increasing the chances of errors.

5. Stock Exchange And It’s Role

1. Determining the security prices

Since the stock exchange operates on the demand and supply of securities, this
concept is leveraged for determining the prices on a continuous basis. Speculation
accelerates this demand and supply in the market. The securities that are growth-
oriented and profitable have a higher value. Based on this valuation of securities,
investors and traders can assess and determine the security that will give them the
most returns on investments.

2. Maintaining Liquidity

One of the most important functions of stock exchange is maintaining liquidity. As

securities can be easily sold and bought on an exchange, there is a higher probability of
converting them into cash. This function allows investors to stay confident about trading
in the stock exchange.

3. Indicating the Economic State

Stock exchanges can very effectively indicate the economic state of the country.
Traders can identify the industries that are growing and that are seeing a downfall. On a
macro level, you can identify sectors that are booming. At a micro level, you can identify
the particular companies that are facing losses. Overall, the entire picture of an
economy can be understood through the situation of a stock exchange.

4. Facilitating investments

Stock exchanges function according to the guidelines of regulatory bodies such as SEBI
in India. Due to the presence of a regulatory bodies, investors and traders feel safe
investing in this market. This facilitates the culture of investment since great amount of
profits can be earned through trading in the stock exchange. In fact, long term trading
can help in compounding your money.

5. Raising capital

For companies, an important function of stock exchange is raising capital. By an

increase in the security prices, companies can raise capital to fund their business
operations and projects. This helps in the growth of industries within the country. Many
companies can even come back from losses by raising capital from traders in the stock
exchange.

6. Building a healthy economy

Investors and companies together build their corpus through stock exchange. While
companies are the most profitable among other market players, individual investors also
make huge profits in the exchange. However, it is noticeable that there is an equal
chance of profit as well as loss.

7. Providing rights to investors

Through the stock exchange, traders invest in equity shares which enable them with
voting rights. As the number of shares goes up, traders get the right to vote and also get
a part in the profit earned by the company. More an investor gets the hold on number of
share, more is their ownership in the company.

6. Recent Trends In Indian Capital Market

1. Economic Liberalization due to Indian Capital Market:

The economic liberalization has led to more deregulation, liberalization and privatization of
some of the public sector undertakings in India. This has resulted in the shares of some of the
public sector undertakings being made available to the public. The Industrial policy adopted by
the government earlier did not allow investment in core sector by either individuals or private
sector. But, with the privatization of some of the public sector undertakings, the shares are now
available to the public for contribution. Example: Steel Authority of India (SAIL). The Navarathna
companies, consisting of major public sector undertakings such as ONGC, BHEL, Oil India Ltd,
Gas Authority etc., are some of the companies which are yet to be privatized. Recently, the
shares of VSNL were bought by TATAs.

2. Promoting more private sector banks:

Opening of more private sector banks has resulted in the public contributing to the shares of
these banks in Indian capital Market. Recently, the government has announced 74% equity
participation by foreigners in private sector banks in India. This has not only promoted new
banks but also paved the way for the merger of existing banks with other banks. Example: The
merger of Bank of Madura with ICICI Bank.
3. Promotion of Mutual Funds:
The promotion of mutual funds by nationalized as well as non-nationalized banks has also
improved the Indian capital market. They were helpful to the public by way of tax saving
schemes. Example: UTI’s monthly income scheme. Mutual Funds promoted by nationalized
banks have increased investments. SEBI has regulated the working of mutual funds and the
banks have to publish their net asset value every week by furnishing the details in leading
newspapers. At present, the condition of some of the mutual funds is very alarming, with the
value of their investment going below the face value of the securities. Hence, there is every
possibility of the public losing their confidence in the mutual funds. example: Unit Trust of India.

4. Regulation of NRI Investments:

The Amendment of Foreign Exchange Regulation Act (FERA) into Foreign Exchange
Management Act (FEMA) has given more encouragement to non resident investors. The
percentage of NRI investment in Indian companies has been increased from 5% to 24%. In the
year 1991, India faced an acute shortage of foreign exchange and the then finance minister
adopted certain methods to improve the foreign exchange reserves. He allowed investment by
any individual NRI in any Indian company from the then existing 5% of paid up capital to 24%.
This had resulted in more inflow of foreign funds into India. Foreign financial institutions have
been made to invest directly in the Indian capital market. The lock-in period of NRIs in equity
shares in Indian companies has been reduced from 3 years to 1 year. Any profit earned while
diluting the shares will attract 20% tax on profit.

5. Direct Foreign Investment:

The Foreign Investment Promotion Board, consisting of the Secretaries of industries, finance
and foreign affairs, have allowed more direct foreign investment in core sector, especially in
power sector.

6. FERA Companies:
Under the Foreign Exchange Regulation Act, a FERA company is one which has 40% equity
participation by foreigners. This limit has been removed and now even foreign companies are
allowed to have 51% equity participation. For example, Colgate Polmolive has increased its
foreign equity participation from 40 to 51%. As a result, we are able to attract more foreign
capital into Indian capital market. The FERA Act has since been amended and is now known as
Foreign Exchange Management Act (FEMA).

7. Online Trading in Indian Capital Market:

Some of the leading stock markets in India have introduced computer system for their trading
activities. The brokers can get hooked-up and do their trading on Online basis. The computer
terminals will enable the public and the brokers to know the price prevailing in the market at any
time. This will prevent speculation activities.
8. Transparency through Online trading:
The online trading through computer has brought in transparency to the transactions in the
market. People are able to know prices prevailing in the market at any time and as such the
brokers cannot deprive their clients of their profits. The manipulation in the opening and closing
prices of shares by the brokers in the market is no longer possible.

9. National Stock Exchange:

A new stock market called National Stock Exchange has been created which has a large
number of companies listed. It is a big competitor to the Bombay Stock Exchange and it is able
to even influence the Bombay Stock Exchange. The National Stock Exchange deals in shares of
companies throughout India and the prices prevailing in the market is a benchmark for stock
prices. The creation of National Stock Exchange has not only widened the market, but has also
subdued the Bombay Stock Exchange. It has paved the way for all the leading companies’
equities being traded through a single market. Thus, it enables the public to know the true
picture of the companies and their real strength.

10. Sensitivity Index in Indian Capital Market:

The calculation of index number has also undergone a change. Sensitivity index has been
introduced which represents important 30 companies whose volume and value of shares
determines the market condition. The sensitivity index is an indication of the conditions
prevailing in the market and the conditions that are likely to be encountered by the market.

11. Circuit-Breaker in Indian Capital Market:

Wild fluctuations in the stock market is a thing of the past. There cannot be any more ‘stock
scam’ as engineered by Harshad Metha. For this purpose, the Bombay stock market has
introduced a cut-off switch which is called circuit breaker. Whenever the market index goes up
by more than 10%, the circuit breaker will go off, bringing the entire operations in the market to
a standstill. This will be for a period of 30 minutes after which the market will resume. This will
bring down the share price. The stock market operates for two hours each day and any
termination in the circuit breaker, after initial 1 and half hours of working will result in the market
closing for the day. Since the market operations cannot be resumed for the day, share prices
will fall. Wild speculation in shares will be a thing of the past.

7. Development Financial Institutions Plays A Vital Role In Corporate Growth

Comment

Corporate finance is a critical function within a company that involves managing

the financial aspects of the business to achieve its overall goals and objectives.
The primary role of corporate finance is to ensure the efficient allocation of
financial resources to maximize shareholder value. Here are some key aspects
and functions of corporate finance:
1. Capital Budgeting:
- Identifying and evaluating investment opportunities to determine which
projects or assets will provide the best return on investment.
- Making decisions about long-term capital expenditures, such as investments
in new machinery, facilities, or technologies.

2. Capital Structure Management:

- Determining the optimal mix of debt and equity to finance the company's
operations and investments.
- Balancing the cost of capital with the financial risk and flexibility of the
organization.

3. Financial Planning and Analysis:

- Developing financial forecasts and budgets to guide the company's short-term
and long-term financial decisions.
- Analyzing financial performance and providing insights to support strategic
planning.

4. Risk Management:
- Identifying and managing financial risks, including market risks, credit risks,
and operational risks.
- Implementing strategies to hedge against adverse financial events.

5. Dividend Policy:
- Deciding on the distribution of profits to shareholders in the form of
dividends.
- Balancing the need for dividends with the company's reinvestment
requirements.

6. Working Capital Management:

- Managing the day-to-day financial operations of the company, including cash
flow, accounts receivable, and inventory.
- Striking a balance between maintaining liquidity and optimizing the use of
working capital.

7. Mergers and Acquisitions (M&A):

- Evaluating and executing mergers, acquisitions, and divestitures to enhance
shareholder value.
- Conducting due diligence and negotiating deals to ensure they align with the
company's strategic objectives.
8. Corporate Governance and Compliance:
- Ensuring compliance with financial regulations and corporate governance
standards.
- Implementing internal controls to safeguard assets and maintain the integrity
of financial reporting.

9. Investor Relations:
- Managing relationships with shareholders and communicating financial
performance and strategies to the investment community.
- Facilitating transparency and trust between the company and its investors.

10. Cost of Capital Management:

- Determining the cost of capital for the company and using it as a benchmark
for investment decisions.
- Continuously assessing and optimizing the cost of capital based on changes
in the financial environment.

Overall, the role of corporate finance is essential in guiding financial strategy,

optimizing the use of resources, and ensuring the long-term financial health and
success of the organization.

8. Challenges Of Financing Corporate Growth

Not Using a Budget

If you’re running your business by the seat of your pants, just hoping
that there will be enough in the bank to pay the bills at the end of the
month, it won’t take long to wind up with more debt and financial
responsibilities than you can handle.

Our advice: Develop and stick to a budget. Doing so will not only help
you plan for the future, it will give you a tool for analyzing expenditures
and the ability to change direction quickly when needed.
Regularly update your budget to reflect current circumstances and use it
to make good business decisions. A budget should be a living
document, not something you write then toss in a virtual (or literal)
drawer.

No Preparation for Unforeseen Expenses

Unforeseen expenses can derail any small business’ best-laid plans.
Having a dedicated account in which you build up a rainy day fund will
give your business a cash reserve that can get you through tough times
—or help you grow when the time is right.

Here’s how it works: When times are good, put what you can into the
account and let it grow over time. You can also set up automatic
transfers from your business checking account to its savings account
so that you don’t need to do it manually; the money will be accessible if
you need to pull some back.

One advantage to a rainy day fund is that it can help you minimize debt,
thereby reducing interest expenses. Which leads us to our next
challenge.

Not Raising Enough Capital

One in five business owners who applied for funding during the prior
five years was denied, according to Nav’s Small Business American
Dream Gap Report, and 82% of all the business owners surveyed didn’t
know how to interpret their companies’ credit scores. The research also
shows that individuals who have a better understanding of their
business credit scores are 41% more likely to be approved for a loan.

Too Much Debt

Entrepreneurs are rightfully proud of “bootstrapping” their way to
success, so it’s not unusual for business owners to take on debt to
launch their businesses. But there absolutely is such a thing as too
much business debt. Maybe they ran up a little too much money on a
personal credit card, or perhaps their local banker extended a line of
credit that’s now used up and commanding a high interest rate.

Whichever debt vehicle was tapped into, these situations can have
significant short- and long-term impacts on the company. For example,
it can take time for a firm’s positive cash flow to start, and in the
meantime, there are employees, suppliers and overhead to pay.

Neglecting Necessary Reporting

Small businesses must record all financial transactions, often with the
help of a bookkeeper. Those items include sales, expenses and
earnings. While private companies aren’t required to report financial
data, poor record keeping can lead to serious problems. Misstating
revenue on tax forms and improper deductions can result in fines,
interest charges or even jail.
For public companies, not reporting financial data, or filing inaccurate
reports, can lead to financial losses and time spent trying to fix
problems.

Accurate reporting is crucial when filing tax forms required by local,

state and federal taxing authorities—and potentially other governing
bodies, depending on where your business is located. Reports must be
filed on time or the company may face fines and other penalties.

Not recording transactions accurately can create a snowball effect,

hurting monthly cash flow and impacting other financial reports. This is
also something that will cause you big problems with auditors.

9. Corporate Governance Occupies A Very Important Role In The

Survival Of The Company. Explain The Importance

1. Ensure a Suitable Board.

The Board should be balanced, competent, and diverse if you are hoping to

achieve success through corporate governance. Aim to have directors who are

qualified, and who understand the business thoroughly but can also offer a fresh

perspective.

2. Review the Board Regularly

The composition of the Board of Directors is critical and can make or break the

success of your organization’s corporate governance. Regularly reviewing your

Board can help to identify any possible shortcomings quickly, which then allows

you to make timely improvements and keep things on track.

3. Build Solid Foundations for Oversight

Overseeing the work of both the Board and management is critical. Develop a

systematic foundation you can use to establish, monitor, and regularly evaluate

their roles and responsibilities. The Board needs to have visibility of management

actions and be available during all key decision making.

4. Aim for Long Term Value Creation

Gearing key performance indicators towards long-term value production, as

opposed to short-term, will ensure sustainable success for your company.

5. Prioritize Risk Management

Establish a risk management process and internal control framework that is both

effective and conducive to your business needs and aim to review its

effectiveness periodically. Disaster recovery plans are critical to any business

endeavor, so regularly keeping yours up to date is never a bad idea.

6. Ensure Reporting Integrity

Corporate reporting is
Corporate reporting is critical, but so too is the insurance of its overall
integrity. Aim to set up safeguards throughout the reporting processes,
such as conducting external audits of the company.

7. Provide Timely and Balanced Information

Transparency with key stakeholders is essential, and this can only be

accomplished when you aim to provide information regularly, both in the good

and bad times. This promotes stakeholders’ confidence in the business and

eliminates the risk of them distrusting your proceedings and pulling out.

8. Emphasize Integrity as a Whole

Practices of integrity do not stop at reporting. Be consistent in your promotion of

ethical behaviors and consult shareholders on their interests and concerns when

it comes to the integrity of your company.

10. WDYMB Stakeholder Relationship, Transparency And Disclosure

Stakeholder Relationship:

● Stakeholder relationship refers to the interactions and connections between a company

and its various stakeholders. Stakeholders are individuals, groups, or entities that have
an interest in the activities, decisions, or performance of a company. They can include
shareholders, customers, employees, suppliers, creditors, regulators, local communities,
and other parties affected by the company's operations.
● Managing stakeholder relationships involves understanding the needs, concerns, and
expectations of these different groups and engaging with them effectively. Companies
engage in dialogue, communication, and collaboration with stakeholders to address their
 interests, gather feedback, and make decisions that consider the impact on all relevant
parties. Positive stakeholder relationships are essential for building trust, reputation, and
long-term sustainability for the company.
Transparency:

● Transparency in the context of business refers to openness, clarity, and honesty in the
company's operations, financial reporting, decision-making processes, and interactions
with stakeholders. Transparent companies provide accurate and easily understandable
information about their activities, financial performance, governance practices, and
environmental and social impacts.

● Transparent communication enables stakeholders to make informed decisions and

judgments about the company. It builds trust among investors, customers, employees,
regulators, and the public. Transparent companies openly disclose both positive and
negative aspects of their operations, fostering credibility and accountability.

Disclosures:

● Disclosures refer to the act of revealing or making information known to stakeholders.

Companies make various disclosures to stakeholders through financial statements,
annual reports, regulatory filings, press releases, and other communication channels.
Disclosures can include financial data, strategic plans, risks, governance practices,
environmental and social impacts, legal matters, and other relevant information.

● Effective disclosures provide stakeholders with a comprehensive understanding of the

company's performance, risks, and prospects. They enable investors to make informed
investment decisions, help regulators ensure compliance with laws and regulations, and
allow other stakeholders to assess the company's impact on society and the
environment.