When business strategy rhymes with financial reporting complexity
The COVID-19 pandemic and the recent invasion of Ukraine are two prime examples of unanticipated shocks that have placed intense strain on companies’ financials. These events generated uncertainty and highlighted the importance of managing risks and being flexible. Financial flexibility can be achieved through retaining adequate cash reserves to handle any unforeseen obligation or constraint, or adopting a cost structure that allows the firm to withstand a sudden decrease in revenues without incurring hefty accounting losses.
By Cédric Poretti, Assistant Professor of Accounting, EHL