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Firm advocates ‘cost reduction mechanism’ for profitability

By on March 21, 2011

HYPEX Consulting has said that for companies and institutions to remain competitive and maintain profitability, they must, as a matter of necessity, look into managing their operating (non-core) costs in an efficient and effective manner, while not compromising quality service delivery.

It noted that the prevailing economic conditions worldwide following the global financial meltdown and the current sweeping reforms in the financial services industry in Nigeria, had presented a number of challenges for virtually every sector of the global economy.

The consulting firm reasoned that the switching off of the credit taps meant that access to credits needed to support revenue growth of companies had been impaired, meaning that disposable incomes of individuals had been curtailed due to drastic cuts in salaries and other employee benefits, massive unemployment, lay-off.

The implication of all these, according to Hypex consulting had been largely noticed in the drastic drop in the revenue growth of most companies, governments and non-governmental organisations as individuals and organisations battle to curtail spending.

But for companies or institutions to wriggle out of this, in a chat with The Guardian at the weekend, Hypex Consulting Managing Partner and Client Service Partner, Olusola Babalola and Ayodeji Monehin advocated that companies and institutions must analyse their total operating costs with a view to making savings in those costs.

According to Babalola, many organisations that had embarked upon cost reduction programmes often lacked a cohesive approach to the process, adding that they lacked clearly defined goals in terms of what was it that they were planning to achieve, how did they define success of the cost reduction programme and by when would they be able to achieve what they had set out for? Will they be able to sustain the programme?

“There are a couple of reasons why organisations which set an ambitious target for themselves falter on what they set out to achieve. Companies invariably have a siloed approach to cost reduction. The responsibility of bringing down costs is vested on specific departments within the organisation. So the finance department, or for that matter the marketing department of that company, is asked to control costs. This makes it more of a short-lived departmental exercise.

“But at Hypex, our core focus, borne out of deep insight into corporate operational performance is on assisting companies and institutions analyse their total operating costs with a view to assisting them find savings in those costs, put in place measures and strategies to implement such savings, and therefore boost their continued profitability on a long term basis,” said the managing partner.

Lending credence to what Babalola said, the client service director, who hinted that the company would be carrying out a strategic sourcing and procurement training for top organisations this week stressed that, organisations must define their cost saving strategies to be able to checkmate the increasing inflation rate and be able to meet their customers demand without eroding on their profitability.

Monehin stressed that Hypex also help corporate and institutional clients in the area of Business Reporting and Analytics, Business Valuation and Modelling in addition to Tax Advisory and Consulting. “These services are aimed at helping our clients to take advantage of emerging business opportunities and position them for better performance,” he stressed.

Source : Guardian