Enterprise Resource Planning (ERP)

The quest of every high-quality corporate executive is to find the keys to superior performance. Achieving market leadership is hard enough, but staying at the top—given intense competition, rapidly changing technology, and shifting global forces—is even more difficult. At the same time, executives are under enormous pressure to deliver profitable growth and high returns for their shareholders. No wonder they constantly search for ways to achieve competitive advantage.

Many risk-management activities at the enterprise level are influenced by various types of pressure. Some are external, such as compliance or regulatory changes, for example. Sometimes, unfortunate events in one’s own company or in the industry prompt internal soul searching regarding whether existing risk-management approaches are adequate. In more and more cases, however, CEOs and business leaders take a more proactive stance, as their goal is to further develop risk-management capabilities (proactively based on their strategic and economic priorities and growing aspiration levels) into a true competitive advantage—ultimately improving business decisions and increasing the value of the company in a risk-conscious way.

Implement Processes to Mitigate Inertia

It’s important to understand why an activity creates value when making decisions on durations or earnings—or both. Learning which activities create the most value and understanding why they hold promise for growth and return on capital is no small endeavor. It takes a certain degree of investment and commitment to ongoing research and analysis, and not every company will have access to the level of data needed. For example, Identify which activities to analyze separately, trading off the costs and data needs of doing the analysis with the increased insights offered by more granularity. One rule of thumb is to continue dissecting activities as long as the underlying sub-segments show significant differences in time and are material in value relative to the project.

Armed with detailed insights into what drives value creation in which segments across the portfolio, executives can more successfully intervene in the planning process and budget allocations, challenging and revising business plans and resource requirements for key segments. Systematic processes can strengthen allocation activities. One approach, is to create planning and management processes that generate a granular view of portfolio and project opportunities. The overwhelming tendency is for corporate leaders to allocate resources at a level that is too high—namely, by division or business unit. When senior management doesn’t have a granular view, division leaders can use their information advantage to average out allocations within their domains.

Executives can further strengthen allocation decisions by creating objectivity through re-anchoring—that is, giving the allocation an objective basis that is independent of both the numbers the business units provide and the previous project allocation. Putting in place some combination of the targets, rules, and processes proposed here may require rethinking the role and inner workings of a company’s strategic- and financial-planning teams. Although we recognize that this is not a trivial endeavor, the rewards make the effort worthwhile. A primary performance imperative for corporate-level executives should be to escape the tyranny of inertia and create more dynamic portfolios.

A Global Network of Expert Practitioners

Our Advanced Operations Group (AOG) is an exceptional team of accomplished professionals with deep functional and industry experience from the very best companies in the world. The AOG provides distinctive knowledge and capability support to ensure our clients receive the best solutions to their biggest challenges, and provides perspectives from multiple industries and functions that help our teams drive their best results. The AOG works directly with the firm's clients and our Client Support Teams to develop and deploy the world's finest operations capabilities.

 

Related Practices

We provide direct on-site support to client process teams to enhance and deepen the capabilities that will deliver sustainable, significant value for their own organizations, their business partners, and their customers.

Mr. Stephen Nelson

Mr. Stephen Nelson

Value Assurance

We have developed a proprietary Value Assurance methodology that we have applied at both public- and private-sector clients across a range of industries.