Question

Discuss why regulatory requirement will mandate an organization to accept negative NPV investment such as sewage treatment plant or COVID19

(400words)

Answer 1

World is One

This world is one,united,interconnected and linked with each other,Home Sapiens are not alone in this world,there are billions of living things crawling,running,flying, swimming,standing and fixing one place upto its end.Apart from that, there are end number of non living things which are in this world." Dont believe anything until it is officially denied" So every living and non living things are interconnected with one another in a close relationship which is hidden in our naked eye.

Globalisation in a part plays a huge role in the last century in preventing wars,uplifting millions of people from poverty,spreading information and knowledge across all over corners of this world.It helps to unite the whole world and see in a prism of one earth and one world.This makes the people highly knowledgable

Now a days informed educated people's,NGO's and other public societies regularly interacting with mass people,business organisations and other regualtory government organisations in making the informed correct decisions in which it is mutual benefited to the whole world.

Understanding Business Ecosystem

Business ecosytem is a network of organization which consists of customers,suppliers,distributors,employees,competitors,regulatory authorities and governement organization.They all depends one another for its survival and they all are constantly interatcting with one another and evolving continuingly.They need to be in order to be survived in this changing environment.

Understanding NPV in terms of Corporate Finance

Positive NPV means present cash inflows is higher than present cash outflows.And perfect investors will always invest in positive NPV in order to acheive the maximum value.But in real life scenario,there are dividend distribution taxes,capital gain taxes and Reinvestment risk which needs to factored in order to choose the good investment.

Every Organisation will face the difficulty in choosing the best opportunity to invest in the diverse portfolio.One of the primary objectives of an Organisation is Profit but nowadays it is understand that sustainable growth is one of the main Long term objective.

Why Regulatory requirement will mandate an organization to accept negative NPV investment such as sewage treatment plant or COVID19 ?

UN Sustainable Development Goals

In 2015,193 Countries in United Nation adopted Agenda 2030,Member countries will be strived to achieve the below goals before 2030 in a top priority basis.

The Sustainable Development Goals are:

1. No Poverty
2. Zero Hunger
3. Good Health and Well-being
4. Quality Education
5. Gender Equality
6. Clean Water and Sanitation
7. Affordable and Clean Energy
8. Decent Work and Economic Growth
9. Industry, Innovation, and Infrastructure
10. Reducing Inequality
11. Sustainable Cities and Communities
12. Responsible Consumption and Production
13. Climate Action
14. Life Below Water
15. Life On Land
16. Peace, Justice, and Strong Institutions
17. Partnerships for the Goals

In order to achieve the UN Sustainable goals,In future most of the government authorities will enforce the act or regulations to make the many business to adhere the sustainable goals of UN.which cannot be achieved by focusing only Positive NPV alone.

Pressure from NGO's,Local Communities and affected people

In most of the situations protest from local and foreign NGO's,Local communities and affected people through their protest will force the government organisations to enforce the company to invest in Negative NPV like sewage treatment plants.

Court orders

In democratic countries,sometimes court orders and ruilings will force the government to enact the regulatory requirement that will mandate an organization to accept negative NPV investment like Pollution control equipments,sewage treatment plants,waste disposable plants.

Global Catastrophe

Global catastrophe's like Natural disaster (Tsunami),Septemeber 11 attack (Terrorism attack) and COVID 19 spread will effect the huge population of people across the world,that will force the governement to take a global consensus and global descisons.This also make an governement to mada an mandatory regulations to an business organisation to accept the negative NPV like Bio security protocols in every organisation,Bomb checking equipments in airports and premium hotels.

Change of Political party/political view

Sometimes new change in political view/political alliances like Green Party,Liberal parties,Pro environment parties will force the the government to enact the mandatory regulations to all the organisation to accept negative NPV'S.

Global Consensus like Paris climate Accord

The Paris Agreement  is an agreement within the United Nations Framework Convention on Climate Change (UNFCCC), dealing with greenhouse-gas-emissions mitigation, adaptation, and finance, signed in 2016.In order to mitigate the global warming all the signed countries will force their home country industries to adhere the paris climate accord.This makes to reduce the carbon footprint in this world.This will mandate an organization to accept negative NPV investment.

Environmental Issues/Loss of human and animal life

Issues like Bhopal tragedy,Gulf of Mexico Oil spill,Japan nuclear accident will have an enormous effect to environment,both human and animal lives.This will force the public to mobilise and protest and this will make the governemnt to enact some stringent regulations,which in turn will force the companies to accept some negative NPV's

Trade Concessions/To increase the export

In order to get orders from European unions,NAFTA Block some of the organisations needs to adhere the stringent quality,environment,legal and social standards.This will force the industries to invest in negative NPV's

Realising the world is one

Climate Change & Global warming

Corporate Social Responsibility

Now a days there is an mandatory CSR spending by organisation to the surrounding communities.

Coporate Governance & acheiving sustainable growth