According to a report published by the OECD a few years ago, more than 40% of the workers in Turkey earn minimum wage. In the past, few of the employees were actually on minimum wage payroll, while many would receive the rest of their wages in cash from their employers in-person. Since it was difficult to create informal expenses without creating informal income first, certain sectors would usually engage in hiring informal employees.
Today, circumstances have changed. As a result of the successive hikes to minimum wage, most of the workers are actually paid minimum wage or an amount quite close to it. Now, the government is expected to raise minimum wage again, which will finally put the minimum wage in Turkey above the rate estimated by the OECD years ago.
Obviously, as the minimum wage increases, prices determined according to the minimum wage will equally go up, and those who earn higher wages will also demand a raise. Since this situation will inevitably damage businesses, I guess that the government is working on a new CGF that will help those having difficulty generating working capital. Otherwise, we might see all layers of the sectors struggling severely between January and May. If foreign demand does not increase soon, Turkey might also face sharp foreign exchange attacks. But the increase in the exchange rates will partially help exporters with the decreasing number of orders.
I wonder under what terms and conditions will banks provide loans to companies to help them stay financially afloat as energy, human resources and other costs continue to rise? It would be appropriate to offer loans directly to the trade sector, but it should be done within the determined limits and quantities that companies need. Or, after determining the credit limits of the companies, banks may make payments, under an agreement or in exchange of invoices, to suppliers from whom companies buy goods or services. If the loans will be used for wage payments, companies will pay their employers by opening accounts at the bank that extends them a line of credit. Actually, all these methods are already being implemented, but this time a more “holistic” approach will be required.
“Financial approach needs to change…”
Companies try to grab as many financing opportunities as possible by working with different banks, but by doing so, they also increase their risks. Because they do not have the staff to manage a financial pool of such large scale. They continue to work with with financial affairs personnel who “know how to keep secrets and have connections that can help the company get loans without giving personal guarantees”, rather than employing well-equipped people who are capable of explaining the company’s vision or making the presentation that will satisfy the banks.
As the upcoming period is expected to bring complex problems, companies will need people who are able to analyse potential outcomes of corporate strategies or decisions so as to avoid worst case scenarios and who are skilled enough to convince banks to loan their company money by providing them with the right information. Companies can only go so far unless they get rid of the personnel who are only equipped with accounting, even pre-accounting knowledge, who turn to financial advisors in every decision they make.
The following three functions will come to the fore in near future:
– Finance
– Human Resources
– Digital Infrastructure
These functions need to act in harmony with each other, assume a common role in future planning, calculate the possible times and costs of financial decisions, monitor all risks in a collective effort, and accordingly provide suggestions or solutions to the management.
Let’s remind ourselves once again of the essence of corporate governance: Management must discover the right thing to do, professionals must do the thing right.
