A pitfall of accelerating inflation

There is no doubt regarding surge global demands in the near future. Thus, while production of food and raw materials rise in the slower pace we will steadily feel higher pressure of growing inflation. Additionally to the constant increase in demands, political battles to boost domestic economies encourage unsustainable decisions. As long as currently accelerating inflation diminishes purchasing power of currencies and value of financial assets, the real global systematic risk arise which is a pitfall for economy growth and financial stability.

However, while somebody concerns about sustainability of economy and measures to keep financial stability, for others - political turmoil, high volatility in the financial markets and increased money supply to maintain liquidity are essential conditions to trade options successfully.

New decision making mechanisms for sustainable development

The signals of 4 percent increase in the consumer prices in January trigger the Bank of England to tighten monetary policy as its official target is 2 percent. Thus, what would be the response and reasoning of monetary policy in the context of more competitive foreign economies when the main reason of rising inflation is the surging food and petrol costs as well as increased VAT?

Solutions to follow the target implicitly will not be successful unless the complex of actions that involves specific monetary and fiscal policies as well as particular provisions for financial institutions are coordinated.  The strategies of sustainable economy growth should include the harmonized control of money supply, efficient allocation of capital and preventive financial stability measures depending on the economy state of the region. Moreover, only decisions made according to the aggregated statistical data but not inflexible commitments could stimulate competitiveness of less attractive industries and prevent from asset bobbles.

So, is it a right time to consider new decision making mechanisms for sustainable development?

Advantage of strategic finance management system

Successful business decisions and significant achievements in the past may raise unbroken beliefs of unfailing positive conditions. However, business development in dynamic business environment meets new challenges and more flexibility is required to sustain long term stability.

Most often unexpected issues arise suddenly as shocks when unfavourable circumstances need to be solved immediately and most likely quick impact measures are implemented to preserve capital in tighter environment conditions. However, such choice may have a negative impact on the long term corporate value as reasons of the problems may not be eliminated.

Changes in legislations, economy conditions, markets, business relationships, innovations, technology or customers’ expectations require transforming business management as complicated decision making regarding future uncertainties raises tensions. Wrong solutions may lead to financial losses, so preparation for changes in dynamic environment seems to be very important.

The issues may be solved and a competitive advantage could be entrenched if changes were predicted in advance and the complex data management systems were improved so that it let to estimate the impact of sensitive indicators on corporation’s strategy and facilitate decision making due to smooth business adaptation to new circumstances and conditions.

Such being the case the prepared methodology of strategic finance management could become an advanced standard of corporate governance and the main tool of corporate decision making.