Question

How might capital requirements substitute for monitoring and surveillance? Why might monitoring and surveillance still be necessary?

Answer 1

Ans.

Capital requirements of a business concern might substitute for monitering and surveillance .

As we know that capital is the amount of money or assets which a business requires to run smoothly and earn profit ,as and when business grows or even in the initial stage infusion of capital is required .Promoters of business may be unable or unwilling to commit full amount of capital from there pocket ,in this situation arises the need of fulfilling capital requirements by borrowing .This borrowing may be from banks and venture capitalist .

In any case when borrowing is resorted for fulfilling capital requirements ,it may lead to automatic mechanisms for surveillance as we know that any organisation whither it is bank or venture capital will need robust system of check and balances in the business before granting any amount towards loan .

Even if there is no external borrowing and promoters are ready to invest additional amount in the business they will also ensure automatic system of monitoring flow of funds and it's proper utilisation till the end result is achieved .

At the same time to say that ,only capital requirements and borrowing will be sufficient to ensure proper machanism of surveillance and monitoring is also not correct.

Surveillance is an ongoing process in any business as well as financial entity ,it allows the investor to be on top of all risk associated with business or its portfolio of loans. It is fundamental principal that the greater degree of control one can exert over portfolio and more precise is the data ,the greater is suitability of it for surveillance.

Surveillance in the business can result in more efficient utilasatiou of human resources of the organization as well if an employee or set of employees are consistently monitored than any scope of mismanagement resulting in inefficient utilization of capital will be minimised and appropriate action can be taken at proper time.