How important is good leadership, corporate governance and sound fiscal policy

I have never been to Sri Lanka. I hear it is a beautiful country, with beautiful beaches, great food, friendly people with infectious smiles but poor corporate governance.

Unfortunately at the moment, the country is facing more than a few challenges with high inflation, lack of medicines and food, electricity power outs for 13 hours, lack of fuel and a host of other difficulties for the average citizen.

The article below highlights how important it is to have good leadership, strong governance models and sane fiscal policies. It is shame to see a country as beautiful as Sri Lanka suffer so much. The principles of sound economic management remain the same, regardless of whether one leads his personal balance sheet, a company balance sheet or a country’s balance sheet. Just like a business, a governments’ balance sheet should be properly managed, based on sound Financial Controllership fundamentals. Elections in Asian countries are won largely on sentiment or emotional grounds. Given high illiteracy rates and high poverty, politicians base election strategies designed to win votes by playing on the sentiments of the lower and middle income class from ethnic, religious issues or promising freebies on basic living essentials.

Growing revenues is a priority and keeping costs lower than one’s revenue to save and invest is another key requirement. To grow revenues, one must develop skillsets and expertise and keep honing those skillsets to remain competitive. Over-reliance on a single source of income without other passive sources of revenue or adequate savings can invite bankruptcy. Maintaining good credit allows one to borrow in times of need so maintaining a positive cash flow is also critical. Debt is a great tool to finance growth but excessive debt that cannot be repaid can ruin your finances. Vanity projects that generate no economic value or investment returns is also a sure path to disaster.

Unexpected events can cause severe shocks. Staying prepared for unexpected emergencies or having a playbook for execution at the time of urgent need is always a good to have in your back pocket. And good corporate governance is a reliable safeguard mechanism.