What are the Challenges faced by Public Limited Companies and Strategies to Overcome them?

Introduction

A Public Limited Company is one of the most common forms of business in the modern era and is governed by the Companies Act, 2013. However, they face various challenges in today’s business environment. In this article, we will discuss what is a Public Limited Company and the challenges faced by companies with strategies to overcome them.

What is a Public Limited Company?

Under the Company Act 2013, a Public Limited Company is one that has limited liability and sells shares to the public. Anyone can buy its stock, either privately through an Initial Public Offering (IPO) or publicly through stock market exchanges. It is governed by tight regulations and must disclose its true financial health to its shareholders.

Challenges Faced By Public Limited Companies: How to Overcome Them?

1. Increased competition

One of the biggest challenges faced by Public Limited Companies is intense competition from traditional competitors and new entrants in the market. The competition can put pressure on pricing, margins, and market share. The established players in the market invest heavily in research and development to create new products and services, improve customer experience, and leverage digital technologies to drive operational efficiencies. To overcome this challenge, companies are required to focus on innovation and differentiation to stay ahead of the competition.

2. Short-term pressure from shareholders

Another challenge faced by Public Limited Companies is to have the legal obligation to maximize shareholder value, which creates short-term pressure from shareholders. Shareholders demand immediate results and returns on investment, which can drive the companies to focus on short-term profitability rather than long-term growth and sustainability. This approach can lead to a lack of investment in research and development, marketing, and other areas critical to long-term success. To address this challenge, companies need to balance shareholder expectations with long-term objectives by communicating effectively with shareholders and outlining the company’s long-term strategic plans.

3. Changing market trends

Market trends are constantly evolving, and companies must adapt to stay relevant and competitive. This is one more challenge faced by Public Limited Companies, which require significant investment in research and development, marketing, and other areas, which can be costly and time-consuming. To overcome this challenge, a company must be agile and responsive to stay ahead of changing market trends.

4. Regulatory compliance

A Company must comply with a range of regulations, from financial reporting requirements to environmental and social responsibility standards. This can be a complex and costly process, and non-compliance can result in fines, legal action, and damage to the company’s reputation. To address this challenge faced by companies, they must prioritize compliance and establish robust compliance programs.

5. Managing risk

A Public Limited Company faces a range of risks, from financial risks to reputational risks. These risks can be difficult to manage and mitigate, and failure to do so can result in significant consequences for the company and its stakeholders. To manage risk effectively, the companies must adopt a comprehensive risk management framework, which involves identifying and assessing risks, implementing appropriate controls and procedures, and regularly monitoring and reviewing risk exposure.

6. Cyber security threats

A Public Limited Company stores a significant amount of data, including sensitive information such as financial data and customer information. Cyber security threats such as hacking, data breaches, and phishing attacks can result in significant financial losses and damage to the company’s reputation. To overcome this challenge faced by companies, they must implement robust cyber security measures, such as firewalls, data encryption, and employee training on cyber security best practices.

7. Economic uncertainty

The Companies face economic uncertainty due to factors such as geopolitical instability, trade tensions, and changes in government policies. Economic uncertainty can impact demand, supply chains, and pricing, creating challenges for Companies. To overcome this challenge, companies must develop robust contingency plans and maintain a strong balance sheet to weather economic downturns.

Conclusion

In conclusion, Public Limited Companies registered under the Companies Act, 2013, face a range of challenges in today’s business environment, including increased competition, short-term pressure from shareholders, changing market trends, regulatory compliance, managing risk, cyber security threats, and economic uncertainty. However, by implementing appropriate strategies and measures, these challenges can be overcome.

Suggested Read: Financial Reporting Requirement for Public Limited Companies