The document discusses financial policy and digitalization. It defines financial policy as decisions related to an organization's financial system, including payment, borrowing, and lending systems. The goals are financial stability, market efficiency, and stakeholder value. A good financial policy promotes long-term growth. Digitalization refers to using digital technologies and data to transform customer and business interactions. Examples given include replacing paper invoices with electronic invoices. Digitalization provides more robust, standardized processes and reduces errors, though it also requires ensuring security of digital data and services.

1. FINANCIAL POLICY AND
DIGITALIZATION
PREPARED BY YASEF
BABASHOV
WORLD ECONOMY

2. WHAT IS THE MEANING OF FINANCIAL
POLICY

3. MEANING OF FINANCING POLICY
• Financing Policy refers to the decisions, choices, or regulations
related to the financial system of the organization like payment
system, borrowing system, lending system, etc. The policies are
framed to introduce financial stability, promote market efficiency
and enhance the value of the firm for its stakeholders.
• A well-made financing policy is important for the growth of the
organization in long run. A business can show good growth and
expand its profitability if the financial aspects are maintained in a
transparent manner. Good governance on financial performance
and financial policy ensures higher returns on the capital invested.
Every organization frames its financing policy depending on its
functionality, requirements, suitability and environment in which it
is functioning.

4. • Like, an organization looking for long-term finance can go for financing in the
form of equity or preference shares, debentures, etc. For short-term finance
requirements like working capital, the organization can borrow funds in the
form of bank loans, factor receivables, commercial paper, etc. Similarly, the
instant requirement of funds can be acheive by trade credit, outstanding
facilities, etc.
• The cost of financing for the long term is always higher than the short term.
However, the risk in short-term financing is always greater. The financing policy
of the organization determines the type of borrowing that a business should opt
for.

5. PRINCIPLES OF FINANCIAL POLICY
1. The principle of freedom. The essence - each country must
build its financial policy taking into account international rules
and its own internal characteristics.
2. Maximum restriction of state intervention in the economy.
State interference in the economy, especially in financial matters,
should be minimal.
3. Ensuring adequacy of financial resources. Each state must first
take this into account when formulating the financial policy of
the country. Because this factor plays the most important role in
the development of the economy.

6. WHAT ARE THE TYPES OF FINANCING
POLICY

7. TYPES OF FINANCING POLICY
•Hedging Policy
Hedging policy involves offsetting the finance for an asset with a
liability that matures on the expected life of the asset.
Conservative Policy
An organization’s attempt to match the assets with the liabilities
is not always possible. In such situations, the business uses a
conservative financing policy. In this policy, the firm uses more
long-term sources of finance and less short-term finance to
purchase its asset. The business acquires permanent and current
assets using long-term sources of finances. Only a part of short-
term finance is used to finance its temporary current assets.

8. •Aggressive Policy
Aggressive financing policy comprises of relying more on short-
term sources of finance than long-term sources. It is termed an
aggressive policy because it is riskier as it involves the
continuous renewal of the borrowing. In this policy, the firm
finances its permanent current assets using short-term sources
of finance.
•Highly Aggressive Policy
A highly aggressive financing policy is one where the major part
of the permanent asset is financed by long-term sources and a
minor portion is financed by short-term sources. It is a common
assumption that the firms which follow this policy are nearing

9. WHAT ARE THE FINANCING POLICY
DECISIONS

10. • Investment Decisions
Investment decisions of the organization depend on the long-term or short-
term investment requirements. The long-term investment decision involves
investment in capital assets of the organization and the short-term
investment decision involves working capital management. The financing
policy of the firm considers the investment requirements and accordingly
arranges for the funds. The interest rates on the long-term funds are
comparatively lower than the short-term funds.
• Financing Decisions
The finance manager of an organization needs to select those sources of
finance that result in optimum and efficient capital structure. The duty of the
finance manager is to select the right proportion of debt and equity in the
overall capital mix. Higher debt results in higher interest liability and higher
risk. By increasing the equity, permanent funds of the business will increase
but it will also result in higher expectations of the shareholders in the form of
a higher required rate of return. The financing decisions are based on
increasing the wealth of shareholders along with the profitability of the

11. • Dividend Decisions
Distributing dividends is an important aspect of the business while
determining the financing policy. The major concern while taking
dividend decisions is determining how much profits are available to
distribute to the shareholders. Dividend decisions must be based on
dividend stability policy and future outlook.
If the firm distributes higher dividends and there are growth
opportunities for the firm, then it will have to borrow funds from the
market to cater to the expansion needs.

12. FINANCIAL POLICY OF
AZERBAIJAN
• Financial policy of Azerbaijan is aimed at the
implementation of the state program of economic
development of the Republic. The development of the
Azerbaijani financial system and the whole market
infrastructure depends on the activities of commercial
banks, insurance company and other financial
institutions.

13. FINANCIAL POLICY OF AZERBAIJAN
• The purpose of financial policy is to ensure the stable development of
the state economy by using of financial relations and financial potential
of the country. The main objectives of Financial policy in Azerbaijan are
consist of:
• Financial legislation
• Organizational forms of financial relations
• Creation and use of state foundations
• Financial forecasting and planning methodology
• Financial management

14. WHAT IS DIGITALIZATION?

15. • Digitalization is defined, among other things, as the conversion
of analog data over to digital data, often through the
introduction of digital technology that streamlines processes
and changes everyday life. The Center for Digitization at BI
Norwegian Business School describes digitization as:
“Digitization is the transformation from IT being a support tool
in the business to being part of its DNA. This means that the
business model, organization and processes are designed in
terms of, to leverage today's and tomorrow's technology”.
• An example of digitalization is to replace a manual distribution
and approval of supplier invoices with an electronic invoice
processing system, or to take analogue data and make them
digital by replacing the issuing of paper invoice with eInvoice.

16. WHY WE DIGITALIZING PROCESSES ?

17. • Among the benefits of digitizing is that digitization provides more
standardized and robust processes, which guarantee consistent processing
and reduce the likelihood of errors occurring. In this way, the organization
becomes less vulnerable to human error.
Unfortunately, digitization also brings with it some disadvantages.
• A digitization process also requires services other than just digitizing the
services. Among other things, the company must think through the security of
the digital services and users of these services, so that the data is stored
securely and inaccessible to unauthorized / outsiders.

18. CUSTOMER BEHAVIOR IN A DIGITALIZED
ENVIRONMENT
This may be the most significant change caused by digitalization. Just remember,
how did you buy anything 15 years ago And how are you buying today? These are
two completely different worlds.
To support that claim, GE Capital Retail Bank’s study has found that 81% of
consumers go online to conduct research before heading out to the store.
Furthermore, there’s a growing trend of buying online, which we’re all aware of.
By fully embracing digital technology, customers are now using the web and mobile
apps to find whatever information they might want, whenever they want it. And
now, customers aren’t only comparing your goods and services to your direct
competitors, but they are comparing them with different industry’s offerings that
may provide even better products and services.
Up to this point, customers are continuously pressuring companies to level up their
customer experience to a certain extent, considering the experiences customers
have with other companies globally.
Companies are reaching new heights thanks to their customers!

19. EFFECTS OF DIGITALIZATION ON
SOURCES OF KNOWLEDGE
Digitalization has blessed us with countless sources of expertise
and knowledge available. Every company needs to be aware of the
knowledge that lies beyond the traditional boundaries.
Companies should learn how to bring together collaborative groups
in such a way that it contributes to both the development and
creation of surplus economic value.
It’s essential to know how to establish relationships with external
communities, but also how and when to capture value when owning
and managing elements of processes.
All in all, digitalization enables a large variety of people to group
together, connecting IT and non-IT departments and impacting the
way businesses create value.

20. DIGITALIZATION VS. DIGITIZATION VS.
DIGITAL TRANSFORMATION

21. • Digitalization vs. digitization
Simply said, digitalization isn’t possible without digitization.
Digitization refers to the conversion of information from analog to digital formats. On the
other hand, digitalization refers to the use of digital technologies and digital data to create
new value-producing opportunities and transform the way customers and companies interact
with each other.
Digitization is more focused on internal optimization of processes such as work automation
and paper minimization while digitalization goes deeply beyond that.
• Digitalization vs. digital transformation
Even though digitalization may often be used as an umbrella term for digital transformation,
both of these terms greatly differ.
Digital transformation refers to much wider use of digital technologies and cultural change.
It’s more about people than it is about digital technologies. It demands core changes in the
organization backed by leadership.
It emphasizes empowering employees with digital technologies in order to change the
corporate culture.
You can already see what’s the big difference between digitalization and digital
transformation.

22. EXAMPLES OF SUCCESSFUL DIGITALIZATION
• There are numerous examples of successful implementations of digital
technologies all around us and yet, we’re not even aware of them.
• When you Google “examples of digitalization”, all you’re offered are results
such as “digitization examples” and “digital transformation examples”. And
you don’t need that at the moment.
• So, let’s take a quick look at how some industries leveraged digital
technologies in order to level up the efficiency of their processes

23. DIGITALIZATION IN AZERBAIJAN
• Continuous scalability in modern infrastructures particularly in the
realm of computing and Information Technology is fundamental in the
gradual economic growth of Azerbaijan. The nation in collaboration
with numerous European organizations and establishments is working
toward life-changing digitalization processes that will minimize the
state’s reliance on naturally occurring resources.
• The plan of Azerbaijan digitalization process is under six infrastructural
growth strategies which include telecommunication infrastructure
advancement and internet connectivity scalability. Further, internet
penetration, mobile internet, and fiber optic technologies are essential
areas for digitalization in Azerbaijan to occur.

26. The digitization process is further ignited as a result of internet penetration
findings and statistics. Internet Penetration can be explained as the association
or rather the relationship between the number of internet users over the
demographical data in a given nation. According to Azerbaijan The Ministry of
Transport, Communications, and High Technologies internet penetration
statistics, 78% of the natives of this country use the internet. Mobile phones and
related technologies were regarded as the most active devices in the internet
domain. According to internet penetration statistics done between 2019 and
2020 an increase of 2.0% of internet users was recorded making overall 80%
internet user natives