Corporate policies guide a company’s approach to day-to-day operations, including growth and social responsibility. They are written by a board of directors and may involve third-party consultants. Policies can address stability, growth, and downsizing.
Corporate policies are guidelines that help direct a company, business or enterprise in determining its approach to issues that arise in the course of its day-to-day operations, including positions on growth and social responsibility. They are normally written by a board of directors responsible for overseeing the general topics that can define a company’s identity and in part determine its success. Among the concerns considered when drafting company policies are factors relating to the internal workings of the company, such as cash flow and labor, as well as external factors, such as market trends and the interest of potential investors and sponsors.
While company policies are often written and approved by a board of directors, consultants and third-party consultants may participate in policy composition. Lawyers, accountants and other financial advisors may collect data relating to market and credit risk. They can assess and predict the company’s financial health, relevant markets, and competition so the board of directors can create well-informed policies.
Many financial experts believe that corporate policies are written to meet the needs of business stability and expansion, as well as strategies for asset reduction. The first of these needs refers to the daily activities of the company. Operational stability may include factors such as cash flow and pricing. Expectations from employees, the quality and effectiveness of technology and equipment, and customer relationships contribute to the stability of operations.
Company policies can also be written as guidelines for growth or expansion. Such capacity increases may include adding to the locations where a business or enterprise can operate, thereby increasing the size of its potential customer base. Growth can also refer to the purchase by a larger company or a parent company of shares in a subsidiary. In both cases, growth should generate higher returns. Policies that provide guidelines for growth can guide the nature of enterprises in which a firm may be involved, as well as the risks the firm may take and the gains it expects to make.
On the other hand, most companies occasionally go through phases where their operations need to be scaled down. The act of ceasing to grow or shrink is known as scaling. Company policies are often written to provide guidance on when a business faces high risk or when it has already suffered damaging losses. Downsizing, if effective, should be able to save resources and provide new structures and strategies under which the firm can operate. Debt restructuring, sale of assets, and layoffs of workforce members are activities that can be addressed in corporate policies that guide the downsizing process.
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