Lars Östman towards a general theory of financial control

Organisations as financial entities  

 

In continuous activities, there may be either a use-perspective on resources or an exchange-

perspective. Some organisations, function-driven or pay-driven, have relatively limited 

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possibilities to adapt to the development of incoming prices. Their own inflows, whether 

operating revenues or allotted means, are not adjusted. Therefore, changing conditions make 

it necessary to re-consider the significance of existing activity flows. Function-driven 

organisations may in reality have to continue their activities within new financial limits. For 

pay-driven organisations there are several alternatives: to expand, to wind up or to 

restructure.  

Pay-driven organisations need a strategic attitude to price movements in their resource 

markets and product markets. For some organisations, trading is not a core activity, but 

price-conditioned cost changes are important for how main operations are carried out and for 

compensatory actions. Thus, there is often an element of trading even in these cases. 

Possible shifts of incoming prices constitute the basis for purchasing and selling strategies. 

For other pay-driven organisations, pure trading of goods and services is the nature of 

activity flows.  Values-in-exchange are in natural focus.      

Within financial business areas, prices of securities and savings instruments are key 

variables, and so are therefore expectations about prices. Expectations, in turn, can aim at 

fundamentals behind the values or possible exchange values as such, whatever the reasons. 

The more the financial markets have developed, the more pure trading elements have 

appeared, that is, deals that are based on predictions and re-predictions of future values-in-

exchange with various time perspectives, including very short horizons. I refer to some 

organisations as transfer-driven. Their activity is, directly or indirectly, based on transactions 

with business units and shares. They are a special form of pay-driven organisations.