Corporate boards that have long relied on easy liquidity to paper over weak capital decisions are running out of road, according to Dr. Deborah David, Chief Financial Officer of Powergas Ebedei Limited. With the cost of capital rising and financial conditions tightening, Dr. David is sounding the alarm: boards that fail to overhaul how they evaluate and approve investments in 2026 do so at their own peril.
“Capital is no longer cheap, and boards must adjust their discipline accordingly,” Dr. David said, on her official Linkedin page, pointing to years of low-cost borrowing that she argues allowed organisations to approve projects on optimism, take on debt without adequate currency matching, and treat liquidity buffers as an afterthought.
That environment, she argues, has decisively shifted.
According to Dr. David, the defining governance challenge for boards this year is capital allocation discipline — and the bar for approving investments must be significantly higher.
She outlined four critical questions she believes serious boards should be asking before greenlighting any major expenditure: whether projections are stress-tested for inflation, foreign exchange volatility, and interest rate shocks; whether hurdle rates genuinely reflect the cost of capital and country risk; whether foreign currency borrowing is matched with foreign currency earnings; and whether adequate liquidity buffers exist to absorb unexpected shocks.
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“These questions are not merely technical,” she said. “They are fundamental governance questions.”
Dr. David invoked a well-worn finance maxim to underscore her point — revenue is vanity, profit is sanity, and cash flow is reality — arguing that boards anchored to this principle are better positioned to survive a turbulent capital environment.
Beyond risk management, she frames disciplined capital allocation as a strategic asset. Boards that enforce rigorous financial governance, she contends, build institutional credibility over time — and that credibility ultimately lowers the cost of capital, creating a long-term competitive advantage that outlasts any single investment cycle.
Her comments come amid a broader tightening of global financial conditions, with rising interest rates, persistent currency pressures across emerging markets, and increasing scrutiny from investors and lenders on how organisations deploy capital.
Dr. David is inviting fellow board members to weigh in on which areas of financial discipline require the most urgent attention in the current environment.
