1. Controlling in a downturn –
the case of Estonia
Estonia
The situation in the Estonian and world economy has a big impact on the
economic situation of the companies and therefore also on the undertakings
of the management and the controlling.
The Bank of Estonia described the situation in their investments, like the real-estate and construction
economic policy statement as follows: industries, are also now struggling to survive. Loo-
• The economic downturn will average 12.3% this king at the “negative” numbers more deeply, the
year, with first positive signs of an end to the so-called crisis is nothing more than a correction of
recession the overheating in the economy. Hard but healthy.
• The main indicators of the Estonian macro The tax system on the one hand, which allows the
economy have continued their fast movement companies to focus on the real business and not
towards a positive balance in recent months supporting report creativity, and on the other hand
• Estonia’s credit market volume is mostly shaped managers who are more in the business than hun-
by the reduced consumption and investment ting shareholders and financing, are the main
intentions of enterprises and households aspects of the Estonian business model and were
• The risks to the Estonian financial system stability the fundament of the Estonian success and develop-
have not eased against the backdrop of ment in the recent years.
uncertain economic and financial conditions in
the world Controlling in Estonian companies is focused on the
• The banks operating in Estonia have enough business, to figure out how to increase turnover,
Harald Kitzmann, Chair of capital to cover possible loan losses induced by how to reduce costs, which activities could be
Operations Management, the difficult economic environment, should the changed or adjusted that the companies are com-
Tallinn University of Technol-
loan portfolio quality deteriorate further ing stay on track and coming back on track. With
ogy; Leader, ICV working
group Estonia • The main preconditions for a rapid recovery of this focus, Estonian controlling is different from the
steady economic growth are the clear perspec- classical German controlling approach, which is
tives of joining the Euro zone in the near future more focused on the collecting of numbers and re-
and restoring fiscal balance and surpluses in the porting of the situation. The objective of optimizing
years ahead. With the inflation rate declining, the annual report to prevent and reduce outflow of
Estonia has a good chance of meeting the liquidity in the form of taxes and dividends is one
Maastricht criteria at the end of 2009. of the main focuses of German controlling. The
• The extensive inflow of cheap loan capital in same objective could found in the reporting to the
recent years caused the overheating of the eco- banks and other financial providers.
nomy and enlarged external imbalances. This It is difficult to find any common objectives and fo-
trend has now turned and the vulnerability of cuses between German and Estonian controlling,
Estonia’s economy is diminishing owing to wea- especially in the present downturn. These differ-
ker domestic demand. The external environment ences need different bases in skills and knowledge
will not enhance export revenues though, at least which are hard to generalizes. It is therefore difficult
not for the time being. However, in the medium to give general recommendations to find ways out
term, economic activity is expected to increase of the downturn and to prevent significant negative
in the nearby regions and external demand is impacts of downturns in the future.
likely to recover gradually.
Vulnerable industries in Estonia were those who are But Estonian companies are focusing on the devel-
dependent on big players in the automotive and opment of the economy; the economic revival has
electronic sectors. But also those industries who already started in Estonian companies. Controlling
participated in the benefits of additional foreign is certainly contributing to this development.
24 CONTROLLER Spezial | Controlling International