Strategic financial management can be described as the allocation of scarce resources to identified possible strategies among competing opportunities and taking necessary actions to monitor the progress of the chosen opportunity so as to achieve set objectives. The Chartered Institute of Management Accountants of UK (CIMA) defines Strategic Financial Management as “the identification of the possible strategies capable of maximizing an organization’s net present value, the allocation of scarce capital resources between competing opportunities and the implementation and monitoring of the chosen strategy so as to achieve stated objectives”. In order to understand what Strategic Financial Management is about, it is necessary to know the meaning of the two words ‘strategy’ and ‘strategic’ as provided by Oxford Advanced Learner’s Dictionary, 6th edition. Strategy: This is the process of planning something or carrying out a plan in a skilful way.
STRATEGIC FINANCIAL MANAGEMENT
Strategic: This is done as part of a plan that is meant to achieve a particular purpose. If the above definitions are used as a guide, the strategic financial management can be defined, as those aspects of the overall strategic plan of an organization that concern the financial managers. For example, there are many aspects of a business plan (to be discussed later under Corporate Strategy): marketing and sales plan, production plan, personnel plan, capital expenditure plan, etc. All these plans have far-reaching financial implications for the financial managers of an organization as they will be expressed in financial terms for the purpose of evaluating the overall performance of the organization; which, itself, is measured in financial terms. There are two broad categories of strategic decisions that are normally made by financial managers of an organization:
(a) the most appropriate level and