From power and utilities to consumer financing, media, postal services and transport, state-owned enterprises (SOEs) often deliver the infrastructure of a country on which prosperity and growth are based. In some cases, SOEs have suffered from a reputation that they do not demonstrate the same degree of financial transparency or efficient business practices as their publicly-owned peers, particularly as they are often monopolies within their respective country. The financial crisis, national budget constraints and a greater emphasis on public accountability have rapidly changed the way in which SOEs are perceived, and the demands that governments, employees, individual and business customers, and regulators are placing on them.
Financial accountability
SOES may be highly profitable or loss-making, according to the service that they provide, but stakeholders demand both value for money and transparency of accounting and financial practices. SOEs are subject to scrutiny to demonstrate that their systems, processes and reporting are free from bribery or corruption, error or risk of fraud, in order to increase public confidence. Furthermore, as governments consider their budget and financing strategy for the future, SOE dispersals are likely to increase further, necessitating a high level of transparency and adherence with accepted accounting principles to attract buyers and investors.
Process efficiency
Related to financial accountability, SOEs need to demonstrate that their processes are efficient and automated, so that staff are focused on value-added tasks as opposed to manual processing. Cash positioning, payment and collection processing, reconciliation and account posting, and integration between banking systems and internal treasury and accounting systems are amongst the areas that SOEs must be able to demonstrate the same degree of automation and efficiency as publicly-held corporations. This also extends to areas such as purchasing and expense management, to ensure adherence with policies, cost control and economies of scale.
Pensions management
Many SOEs have large workforces resulting in complex and substantial retirement schemes. In western economies, many SOEs are dealing with large pensions deficits and a declining workforce. In emerging markets, SOEs increasingly required to provide enhanced retirement provisions as governments tackle the challenges of an aging population and growing workforce. Although the challenges may be different, most SOEs are being forced to re-consider their retirement planning strategies in the face of significant demographic, regulatory, investment, risk management and administrative challenges.
