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Growing or counting beans

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Source: Internet: https://www.techtarget.com/searchcio/definition/CFO

At the 35th ASIAN Conference in Ho Chi Ming City, Professor Yoshikatsu Shinozawa from Hitotsubashi University in Japan presented a fascinating paper titled “Counting or Growing Beans: The presence and strategic impact of chief financial officers (CFOs) in Japanese firms.” The paper highlights the need for CFOs to play a more proactive role in the company’s success, similar to how the CEO of Coca-Cola, Roberto Goizueta, once put it. He said that nowadays, CFOs are not just responsible for managing the company’s current financial situation but also for finding innovative ways to expand and grow the business, like cultivating new beans alongside the existing ones. This calls for a more dynamic and strategic approach from CFOs to drive the company forward and create value.

On the importance of accountability of financial reporting, Generally, CFOs are considered the financial stewards of their companies and arguably second in importance only to the Chief Executive Officer (CEO) in corporate hierarchies. Indeed, following the Enron crisis, the importance of the role a CFO plays is now fully recognized by regulators. For example, the Sarbanes-Oxley Act of 2002 requires both the CEO and CFO of a publicly traded U.S. firm to personally certify the material accuracy and completeness of the financial information and disclosures released to the public.

Thus, in the U.S., the CFO is legislatively elevated to the same level of the CEO in terms of financial reporting and oversight. CFOs, particularly in a US corporation, oversee the implementation of accounting principles and procedures and the preparation of financial reports. They are also responsible for establishing and maintaining internal controls and reporting any deficiencies to the audit committee and the external auditors. As a result, CFOs must work closely with internal auditors in order to identify any potential internal control weaknesses.

CFOs can potentially influence the quality of financial reporting by monitoring the expertise of accounting personnel, by their attitude toward internal controls, and through their role as conduits of information to directors, other managers, and auditors. Because they link with other functional directors, the CEO and auditors, their role in the firm is more strategic than operational. As such CFOs have also become key players in strategic planning, mergers and acquisitions, implementing information technology initiatives and managing associations with venture capitalists and the investing public.

Five decades ago, the role of CFOs was never this complicated nor seen as this strategic, at a time when corporate finance was a back-office function performed by treasurers or 3 controllers, whose duties were confined to tasks like bookkeeping, preparing tax statements, monitoring debt and capital structures.

Decision-making was the prerogative of operational managers from manufacturing to sales and marketing, while the corporate treasurer was mainly involved with creating the budget, usually after production decisions had been made. Extant literature offers two reasons behind the rise of the finance manager from the traditional role of bookkeeping to the level of chief. The first argument is predicated on the firms’ dependency on capital, particularly during times of financial crises or following the passing of unfavourable legislation that impacted on earnings statements. The salience of external financing suggested that management had to restructure the locus and nature of financial expertise within firms in order to meet firms’ funding needs. The uncertainty associated with external financing due to fluctuations in stock markets and interests made the presence of a financial expert in the boardroom even more exigent.

The second reason was borne out of the central theme of the shareholder system that the firm should be taken as a vehicle for investment, involving assessment of risk and investing in less risky but potentially value-enhancing projects. Consequently, this had the effect of casting managers with a background in finance as best equipped to run corporations, leading to the transfer of control from production to finance. Consequently, as Khan says, companies started looking for financial officers who could do more than cut costs…so CFOs tossed aside their green eyeshades and turned to more creative pursuits.

A similar sentiment was expressed by Roberto Goizueta, the late chairman and CEO of Coca-Cola between 1981-1997 when he said that today’s CFOs are being asked to grow new beans in addition to counting the company’s existing beans. It can be argued, therefore, that changes to the role of CFOs came as a result of the need for firms to pay attention to the whims of financial markets, a development that saw the finance manager move from the tail-end of corporate decision-making to its strategic apex as part and parcel of the shareholder movement.

MBA

In addition to professional qualifications, the pursuit of Master of Business Administration (MBA) degrees by many senior managers, including CEOs and CFOs, is very common due to the value and benefits of it interalia:

1. Broad Skill Set: MBAs provide a well-rounded education, covering various business disciplines such as finance, marketing, operations, strategy, and leadership. This diverse skill set equips senior managers with a comprehensive understanding of different aspects of business management, enabling them to make informed and strategic decisions.

2. Leadership Development: MBA programs often include courses and experiential learning opportunities focused on leadership and management skills. CEOs and CFOs need strong leadership capabilities to inspire and guide their teams effectively, making an MBA a valuable tool in honing these critical attributes.

3. Networking Opportunities: MBA programs typically attract a diverse group of professionals from different industries and backgrounds. Building a strong network of peers, professors, and alumni can provide senior managers with valuable connections and resources that can be leveraged throughout their careers.

4. Global Perspective: In an increasingly interconnected world, understanding global business trends and dynamics is essential for senior executives. MBA programs often offer international experiences, exposure to global case studies, and discussions, preparing managers to navigate the complexities of the global market.

5. Adaptation to Changing Business Environment: The business landscape is constantly evolving, with new technologies, market dynamics, and regulatory changes emerging. An MBA education provides senior managers with the tools to adapt and stay ahead of these changes, making them more effective leaders in dynamic environments.

6. Problem-Solving and Analytical Skills: MBA programs emphasize critical thinking, problem-solving, and data analysis, which are essential skills for senior managers. The ability to analyze complex situations, identify opportunities, and devise effective strategies is invaluable in leading companies to success.

7. Credibility and Career Advancement: Earning an MBA from a reputable institution enhances a senior manager’s credibility and can open doors to career advancement opportunities. The degree can demonstrate a commitment to professional growth and excellence, increasing the likelihood of being considered for higher-level roles.

8. Continuous Learning and Personal Growth: Pursuing an MBA is not just about gaining knowledge; it is also about personal development. Senior managers often view the degree as a way to challenge themselves intellectually, broaden their horizons, and push their boundaries, leading to personal growth and self-improvement.

9. Access to Specialized Knowledge: While senior managers may have substantial experience in their respective fields, an MBA can provide them with specialized knowledge in areas they may not have encountered in their career. This broader perspective can lead to innovative solutions and fresh insights.

10. Succession Planning and Talent Development: Some companies encourage senior managers to pursue MBAs as part of their succession planning and talent development strategies. Investing in the education of promising leaders ensures a pipeline of skilled executives who can drive the company forward.

(The author, a senior Chartered Accountant and professional banker, holds a PhD from AUT university in New Zealand. He has authored numerous national and international publications. Currently, he is Professor in Business Management at SLIIT Business School, SLIIT University, Malabe. The views and opinions expressed in this article are solely those of the author and do not necessarily reflect the official policy or position of the institution he works for.)



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More dates for Rajiv … in the UK

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Rajiv … the sarama scene

Rajiv Sebastian, veteran of Sri Lankan music and one of the island’s most versatile entertainers, is back in the UK, as was reported in The Island, last Tuesday (21), keeping his fans, in that part of the world, extremely happy and, literally, shouting for more!

Rajiv was originally scheduled to do four events but with his UK fans wanting more, two more dates have been added to the singer’s itinerary.

Saturday, 9th May, Rajiv will move into action at the Sri Lankan Cultural Day 2026, to be held at Southampton.

They say it’s a full day event of family fun, with music, food and culture, including Avurudu games, etc., and I’m sure Rajiv would love such a scene, and, of course, he will be there in a big way, with his Avurudu outfit of the sarama (sarong)!

On his return to Sri Lanka, Rajiv mentioned that he and his band The Clan have two overseas assignments lined up.

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Federalism and paths to constitutional reform

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Chelvanayakam (R) and S. W. R. D. Bandaranaike shaking hands.

S. J. V. Chelvanayakam: Visionary and Statesman

S. J. V. Chelvanayakam KC Memorial Lecture Delivered at Jaffna Central Collage on Sunday, 26 April, by Professor G. L. Peiris – D. Phil. (Oxford), Ph. D. (Sri Lanka); Rhodes Scholar, Quondam Visiting Fellow of the Universities of Oxford, Cambridge and London; Former Vice-Chancellor and Emeritus Professor of Law of the University of Colombo.

I. Life and Career

Had Mr. Chelvanayakam been with us today, he would no doubt be profoundly unhappy with the state of our country and the world.

Samuel James Velupillai Chelvanayakam was born on 31 March, 1898, in the town of Ipoh, in Malaya. When he was four years of age, he was sent by his father, along with his mother, for the purpose of his education to Tellippalai, a traditional village at the northern tip of Sri Lanka, or Ceylon as the country was then called, in close proximity to the port of Kankesanturai. He attended three schools, Union College in Tellippalai, St John’s College Jaffna and S. Thomas’ College Mount Lavinia, where he was a contemporary of S. W. R. D. Bandaranaike, with whom he was later destined to sign the Bandaranaike-Chelvanayakam Pact.

He graduated in Science as an external student of the University of London, in 1918. In 1927, he married Emily Grace Barr-Kumarakulasinghe, daughter of the Maniyagar, or administrative chief for the area, appointed by the colonial government. He had four sons and a daughter. His son, S. C. Chandrahasan, worked closely with me during my time as Foreign Minister on the subject of repatriation of refugees from India. Chandrahasan’s wife, Nirmala, daughter of Dr. E. M. V. Naganathan, was a colleague of mine on the academic staff of the University of Colombo.

Mr. Chelvanayakam first contested the Kankesanturai constituency at the parliamentary election of 1947. His was a long parliamentary career. He resigned from his parliamentary seat in opposition to the first Republican Constitution of 1972, but was re-elected overwhelmingly at a by-election in 1975. He died on 26 April, 1977.

There are many strong attributes which shine through his life and career.

He consistently showed courage and capacity for endurance. He had no hesitation in resigning from employment, which gave him comfort and security, to look after a younger brother who was seriously ill. As his son-in-law, Professor A.J. Wilson remarked, he learned to move in two worlds: a product of missionary schools, he was a devout Christian who never changed his religion for political gain. He was, quite definitely, a Hindu by culture, and never wished to own a house in Colombo for fear that his children would be alienated from their roots.

Gentle and self-effacing by disposition, he manifested the steel in his character by not flinching from tough decisions. Never giving in to expediency, differences of principle with Mr. G. G. Ponnambalam, the leader of the All Ceylon Tamil Congress, of which Mr. Chelvanayakam was a principal organiser, led him to break away from the Congress and to form a new party, the Ilankai Tamil Arasu Kachchi, or the Federal Party.

During the disturbances in March and April, 1958, he was charged in the Magistrate’s Court in Batticaloa and sentenced to a week’s imprisonment. He was also subject to house arrest, but he never resorted to violence and used satyagraha to make his voice heard. When, in 1961, he was medically advised to travel to the United Kingdom for surgical treatment, he had to be escorted to the airport by the police because he was still under detention. Although physically frail and ailing in health during his final years, he lost none of the indomitable spirit which typified his entire life.

II. Advocacy of Federalism: Origins and Context

At the core of political convictions he held sacrosanct was his unremitting commitment to federalism. A moment of fruition in his life was the formation of the Federal Party, Ilankai Tamil Arasu Kachchi, on 18 December, 1949.

Contrary to popular belief, however, federalism in our country had its origin in issues which were not connected with ethnicity. At its inception, this had to do with the aspirations, not of the Tamils, but of the Kandyan Sinhalese. The Kandyan National Assembly, in its representations to the Donoughmore Commission, in November, 1927, declared: “Ours is not a communal claim or a claim for the aggrandizement of a few. It is the claim of a nation to live its own life and realise its own destiny”.

Mr. S. W. R. D. Bandaranaike, soon after his return from Oxford, as a prominent member of the Ceylon National Congress, was an ardent advocate of federalism. He went so far as to characterise federalism as “the only solution to our political problems”. With Thomas Hobbes in his famous work, The Leviathan, he conceived of liberty as “political power broken into fragments”. Bandaranaike went on to state in a letter published in The Morning Leader on 19 May, 1926: “The two clashing forces of cooperation and individualism, like that thread of golden light which Walter Pater observed in the works of the painters of the Italian Renaissance, run through the fabric of civilisation, sometimes one predominating, sometimes the other. To try and harmonise the two has been the problem of the modern world. The only satisfactory solution yet discovered is the federal system”.

Federalism had a strong ideological appeal, from a Marxist-Leninist perspective. The constitutional proposals, addressed by the Communist Party of Ceylon to the Ceylon National Congress on 18 October, 1944, go very far indeed. They envisioned the Sinhalese and the Tamils as two distinct “nations” or “historically evolved nationalities”. The high watermark of the proposals was the assertion that “Both nationalities have their right to self-determination, including the right, if they so desire, to form their own separate independent state”.

These proposals received further elaboration in a memorandum submitted to the Working Committee of the Ceylon National Congress by two leading members of the Communist Party, Mr. Pieter Keuneman and Mr. A. Vaidialingam. Their premise was set out pithily as follows: “We regard a nation as a historical, as opposed to an ethnographical, concept. It is a historically evolved, stable community of people living in a contiguous territory as their traditional homeland”.

The Soulbury Commission, which arrived in the country in December, 1944, had no hesitation in recognising that “The relations of the minorities – the Ceylon Tamils, the Indian Tamils, Muslims, Burghers and Europeans, with the Sinhalese majority – present the most difficult of the many problems involved in the reform of the Constitution of Ceylon”.

They took fully into account the apprehension expressed by the All Ceylon Tamil Congress that “The near approach of the complete transfer of power and authority from neutral British hands to the people of this country is causing, in the minds of the Tamil people, in common with other minorities, much misgiving and fear”.

III. Constitutional Provisions at Independence

The Souldbury Commission, like the Donoughmore Commission before it, was not friendly to the idea of federalism, principally because of their commitment to the unity of the body politic. Opting for a solution, falling short of federalism, they adopted the approach that, if the underlying fear related to encroachment on seminal rights by capricious legislative action, this anxiety could be convincingly assuaged by enshrining in the Constitution a nucleus of rights placed beyond the reach of the legislature.

The essence of the solution, which commended itself to the Soulbury Commission, was a carefully crafted constitutional limitation on the legislative competence of Parliament, encapsulated in Article 29(2) of the Independence Constitution. The gist of this was incorporation of the principle of non-discrimination against racial or religious communities by explicit acknowledgement of equal protection under the law.

The assumption fortifying this expectation was the attribution of an imaginative role to the judiciary in respect of interpretation. It was lack of fulfillment in this regard that precipitated a setback which time could not heal. Judicial attitudes, including those of the Judicial Committee of the Privy Council, which constituted at the time the highest tier of the judicial hierarchy, were timid and diffident.

When the Citizenship Act of 1948, by means of a new definition, sought to deprive Tamils of Indian origin of the suffrage, no protection was forthcoming from the courts on the ground of impermissible discrimination. This refusal of intervention was premised on an implausibly narrow construction of the word “community”, in that, according to the Courts’ reasoning, in the landmark case of Kodakkan Pillai v. Madanayake, Indian Tamils were not identifiable as a community distinct from the larger community of the Tamils of Ceylon. It is hard to disguise the reality that this was, at bottom, a refusal to deal with the substantive issues candidly and frontally.

The resulting vulnerability of minority rights, which judicial evasion laid bare, was a major contributory cause of the erosion of confidence on the part of minority groups. This mood of suspicion and despair, arising from an ostensibly weak method of protection of human rights, presaged ensuing developments.

IV. Further Quest for a Constitutional Solution

Chelvanayakam

The central theme of this lecture, in honour of a statesman who was an epitome of restraint and moderation, is that the deterioration of ethnic relations, which culminated in a war of unrivalled savagery over a span of three decades, was progressive and incremental. There was no inevitability about the denouement. It was gradual and potentially reversible. At several crucial points, there was opportunity to arrest a disastrous trend. These windows of opportunity, however, were not utilised: extremist attitudes asserted themselves, and polarisation became the outcome. This trajectory was, no doubt, met with dismay by far-sighted leaders of the calibre of Mr. Chelvanayakam.

The formation of the Federal Party was a turning point. With Mr. S.J.V. Chelvanayakam, King’s Counsel, as founder-president, and Dr. E.M.V. Naganathan and Mr. V. Navaratnam as joint secretaries, the party embarked on a journey which marked a radical departure from the conventional thinking of the past. This was plain from the text of seven resolutions adopted at the national convention of the party held in Trincomalee in April, 1951. The foundation of these resolutions was the call to establish a Tamil state within the Union of Ceylon, and the uncompromising assertion that no other solution was feasible.

The path was now becoming manifest. The demand up to now had been for substantial power sharing within a unitary state. This was now giving way to a strident demand for the emergence of a federal structure, destined to be expanded in the fullness of time to advocacy of secession.

Although standing out boldly as a landmark in constitutional evolution, the Federal Party resolutions did not carry on their face the hallmark of finality or immutability. The call of the Tamil leadership for secession yet being some years away, the ensuing decades saw further attempts by different governments to resolve the vexed issues around power sharing.

The first of these was the Bandaranaike-Chelvanayakam pact, signed by the Prime Minister and the leader of the Federal Party on 26 July, 1957. There was an air of uneasy compromise surrounding the entire transaction. This was evident from the structure of the pact, which, as one of its integral parts, contained a section not reduced to writing in any form, but consisting of a series of informal understandings.

The essence of the pact was the proposed system of regional councils which were envisaged as an intermediary tier between the central government and local government institutions. This did break new ground. Not only did the pact confer on the people of the North and East a substantial measure of self-governance through these innovative councils, including in such inherently controversial areas as colonisation, irrigation and local management, but territorial units were conceived of as the recipients of devolved powers. Of particular significance, the regional councils were to be invested with some measure of financial autonomy. The blowback, however, was so intense as to compel the government to abrogate the pact.

The next attempt, eight years later, was by the United National Party, which had vehemently opposed the Bandaranaike–Chelvanayakam Pact. This was the Dudley Senanayake–Chelvanayakam Pact, signed between the leader of the United National Party, at the time Leader of the Opposition, and the leader of the Federal Party. It differed from the Bandaranaike–Chelvanayakam Pact, both contextually and substantively.

As to context, it was signed on 24 March, 1965, on the eve of a parliamentary election, to ensure for the United National Party the support of the Federal Party. A disheartening feature was the plainly evident element of duplicity. Once in government, the Prime Minister’s party showed little interest in implementing the pact. Within three years, the Federal Party left the government, and its representative in the cabinet, Mr M. Tiruchelvam QC, Minister of Local Government, relinquished his portfolio.

Substantively, the lynchpin of the pact was a system of district councils, but there was entrenched control of these bodies by the central government, even in regard to action within their vires. This was almost universally seen as a sleight of hand.

Despite the collapse of these efforts, room for resilience and accommodation had by no means disappeared. Nowhere is this better exemplified than in the events which led up to the drafting and adoption of the “autochthonous” Constitution of 1972. This involved the historic task of severing the centuries-old bond with the British Crown and bringing into being the Republic of Sri Lanka.

One of the Basic Resolutions, which eventually found expression as Article 2 of the new Constitution, characterised Sri Lanka as a unitary state. The Federal Party proposed an amendment that the word “federal” should be substituted for “unitary”. Mr. V. Dharmalingam, the spokesman for the party on this subject, in his address to the Constituent Assembly, on 16 March, 1971, showed flexibility by declaring that the powers of the federating units and their relationship to the centre were negotiable, once the principle of federalism was accepted. Indivisibility of the Republic was emphatically articulated, self-determination in its external aspect being firmly ruled out.

There was no reciprocity, however. Mr. Sarath Muttettuwegama, administering a sharp rebuke, declared: “Federalism has become something of a dirty word in the southern parts of this country”. The last opportunity to halt the inexorable march of events was spurned.

The pushback came briskly, and with singular ferocity. This was in the form of the Vaddukoddai Resolution adopted by the Tamil United Liberation Front at its first national convention held on 14 May, 1976. The historic significance of this document is that it set out, for the first time, in the most unambiguous terms, the blueprint for an independent state for the Tamil nation, embracing the merged Northern and Eastern Provinces. The second part of the Resolution contained the nucleus of Tamil Eelam, its scope extending beyond the shores of the Island. The state of Tamil Eelam was to be home not only to the people of the Northern and Eastern Provinces, but to “all Tamil-speaking people living in any part of Ceylon and to Tamils of Eelam origin living in any part of the world who may opt for citizenship of Tamil Eelam”.

The most discouraging element of this sequence of events was the timid and evasive approach adopted by prominent actors at crucial moments. The District Development Councils Act of 1980 presented a unique opportunity. Disappointingly, however, the Presidential Commission, presided over by Mr. Victor Tennekoon QC, a former Chief Justice and Attorney General, lacked the courage even to interpret the terms of reference as permitting allusion to the ethnic conflict. Despite the persevering efforts of Professor A.J. Wilson, son-in-law of Mr. Chelvanayakam, and a confidant of President J.R. Jayewardene, and Dr. Neelan Tiruchelvam, the majority of the members were inclined to adopt a narrow, technical interpretation of the terms of reference. The setting of the legislation was one in which Tamil formations, such as the Tamil United Liberation Front, were struggling to maintain their moderate postures in an increasingly polarised environment, with pressure from radical elements proving almost irresistible.

The whole initiative paled into insignificance in comparison with a series of tragic events, including the burning of the Jaffna library during the run-up to the District Development Council elections in the North and the calamitous events of Black July 1983. Policymakers, at a critical juncture, had, once again, let a limited opportunity slip through their fingers.

The next intervention occurred in the sunset years of the United National Party administration. This was the Parliamentary Select Committee on the ethnic conflict, known after its Chairman as the Mangala Moonesinghe Committee, appointed in August, 1991.

The Majority Report made a detailed proposal which was intended to serve as the basis of a compromise between two schools of thought—one stoutly resisting any idea of merger of the Northern and Eastern Provinces, and the other demanding such merger as the indispensable basis of a viable solution. An imaginative via media was the concept of the Apex Council, which formed the centrepiece of the Majority Report. It adopted as a point of departure two separate Provincial Councils for the North and the East. This dichotomy would characterise the provincial executive as well: each Provincial Council would have an Executive Minister as the head of the Board of Ministers. However, over and above these, the two Provincial Councils together would constitute a Regional Council for the entire North-East region. Although presenting several features of interest, as a pragmatic mediating mechanism, the proposal did not enjoy a sufficiently broad support base for implementation. (To be concluded)

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Procurement cuts, rising burn rates and shipment delays deepen energy threat

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Norochcholai power plant

Coal crisis far worse than first feared

Sri Lanka’s coal supply crisis is significantly deeper than previously understood, with senior engineers and energy analysts warning that a dangerous combination of reduced procurement volumes, rising coal consumption and shipment delays could place national power generation at serious risk.

Information reviewed by The Island shows that Lanka Coal Company (LCC) had originally planned to secure 2.32 million metric tons of coal for the relevant supply period to meet generation requirements at the Lakvijaya coal power complex.

Following procurement discussions, the final arrangement was to obtain 840,000 metric tons from Potencia, including a 10 percent optional quantity, and 1.5 million metric tons from Trident, equivalent to 25 vessels.

However, subsequent decisions resulted in the cancellation of four Potencia shipments, reducing that supplier’s volume to 627,000 metric tons. This brought the total expected procurement down to 2.16 million metric tons, creating an immediate 160,000 metric ton deficit, even before operational demand is considered.

“This is a major shortfall in any generation planning model,” a senior engineer familiar with coal operations said. “When stocks are planned to the margin, a reduction of this scale can have serious consequences.”

Power sector sources said the deficit becomes more critical because coal consumption rates have increased by more than 10 percent, meaning larger volumes are now required to generate the same electricity output.

“In simple terms, the system is burning more coal for less efficiency,” an energy analyst told The Island. “That means the real shortage may be substantially larger than the paper shortage.”

Experts attributed the higher burn rate to ageing equipment, maintenance constraints and operating inefficiencies at the Norochcholai plant.

A third concern has now emerged in the form of shipment delays and possible unloading constraints, raising fears that even contracted supplies may not arrive in time to maintain safe reserve levels.

“If vessel schedules slip or unloading is disrupted, stocks can fall very quickly,” another senior engineer warned. “At that point, the country has little choice but to shift to costly thermal oil generation.”

Such a move would sharply increase electricity generation costs and place additional pressure on public finances.

Analysts said the convergence of three separate risks — procurement reductions, higher-than-expected consumption and delivery uncertainty — had created a serious energy planning challenge.

“This is no longer a routine procurement issue,” one industry observer said. “It has become a national power security issue.”

Calls are growing for authorities to disclose current coal inventories, incoming vessel schedules and contingency measures to reassure the public and industry.

With electricity demand expected to remain high and hydro resources dependent on rainfall, engineers caution that delays in addressing the coal gap could expose the country to avoidable supply disruptions in the months ahead.

By Ifham Nizam

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