Making uncertainties manageable - Risk-based Planning

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Information about Making uncertainties manageable - Risk-based Planning
Business & Mgmt

Published on February 4, 2014

Author: RalfHeim

Source: slideshare.net

Description

This Presentation had been held at the Finance Directors Strategy Forum 2013 in Interlaken.

It illustrates how scenario-based thinking can be combined with simulations to making uncertainties manageable. The objective of this approach ist, to leave the path of best guesses by putting complexity into the Database without confronting the top management.

MULTI-SCENARIO PLANNING INCORPORATING RISKS Ralf Heim Corporate Development Manager cundus AG

A WELL-KNOWN SITUATION? Actual Revenue in 2013 behind Plan The Volatility of the exchange rate shouldn‘t have been a surprise If that‘s the case… Why did we made such offensiveJahreshauptversammlung 2012 strategy decisions? Also the competition from India has been discussed before 23

THE „ARTIFICIAL TRUTH“ OF BUSINESS PLANING World of Planning World of Risk Management Planning and Risk Management don‘t speak the same language!

THE BORDERLINE OF „DETERMINISTIC PLANNING“ 22,5 Asia 19,2 72,2 America InMotion Group 30,5 Europe Revenue in bn. €

THERE IS >1 SCENARIO FOR MARKET GROWTH 22,5 Market Growth 3 13 23 33 Asia 19,2 3 13 23 72,2 33 America InMotion Group 30,5 3 13 23 Europe Revenue in bn. € 33

THE EFFECT ON THE TOTAL RISK PROFILE 22,5 Market Growth 3 13 23 33 Asia 19,2 3 13 23 72,2 33 America 13 23 Europe Revenue in bn. € 39 69 InMotion Group 30,5 3 9 33 99

MODELING THE TOP INFLUENCER INTO THE PLAN 22,5 Market Growth 3 13 23 33 Asia Competition 19,2 3 13 23 72,2 33 America 13 23 Europe Revenue in bn. € 39 69 InMotion Group 30,5 3 9 33 99

THE EFFECT ON THE TOTAL RISK PROFILE 22,5 Market Growth 3 13 23 33 Asia Competition 19,2 Exchange Rate Volatility 3 13 23 72,2 33 America 30,5 13 23 Europe Revenue in bn. € 39 69 InMotion Group … 3 9 33 99

INTEGRATION OF RISK ACTIONS 22,5 Market Growth 3 13 23 33 Asia Competition Action 1 Action 2 19,2 Exchange Rate Volatility 3 13 23 72,2 33 America Action 3 30,5 13 23 Europe Revenue in bn. € 39 69 InMotion Group … 3 9 33 99

THERE IS A LOT OF DATA THAT CAN BE USED DWH DWH-INTEGRATION MARKET DATA CROWD-SOURCING RISK ASSESSMENT WORKSHOP

UNITING THE „MARKET EXPERTS“ AT ONE TABLE Market Risk/Chance Evaluation Market Growth Estimation 5% 4% 3% 2% 1% 0% Gartner predicts the market to grow between 1% to 5% -1% 14% 14% 14% 14% 14% 14% 14% cundus Broadwith Planning

… AND CHANGE THE „WAY OF INTERACTION“ Market Risk/Chance Evaluation Market Growth Estimation 23% 19% 18% 14% 14% 7% 5% 4% 3% 2% 1% 0% 5% -1% Gartner predicts the market to grow between 1% to 5% We expect a 1%-growth. And a 3% growth is more realistic then -1% cundus Broadwith Planning

„SHAPE THE FUTURE“ & MATERIALIZE KNOW HOW Market Risk/Chance Evaluation Market Growth Estimation 21% 17% 17% 14% 12% 8% 7% 5% 4% 3% 2% 1% 0% -1% 4% -2% Gartner predicts the market to grow between 1% to 4% We expect a 1%-growth. And a 3% growth is more realistic then -1% cundus Broadwith Planning Due to conjuncture forecast we see -2% more realistic then 4%

Risk-adjusted Planning DASHBOARD

Risk-adjusted Planning DASHBOARD Plan 2014 revenue (TEUR)

Risk-adjusted Planning DASHBOARD Plan 2014 21 MCS result Delta 72 revenue (TEUR) 48 98 7 32

Risk-adjusted Planning DASHBOARD Plan 2014 21 48 72 7 32 98 MCS result Delta

Risk-adjusted Planning DASHBOARD Plan 2014 21 48 72 7 32 98 MCS result Delta

Risk-adjusted Planning DASHBOARD Plan 2014 21 48 72 7 32 98 MCS result Delta

KEEP THE FOCUS WITH MULTI-SCENARIO PLANNING… Risk-adjusted Planning DASHBOARD Asias Risk Profile looks pretty broad. We face high uncertainty there Okay. Lets build some market entry barriers, but also lower the quantity of this model Agreed. Especially in the coupe-market our new competitor might steal our share 23 cundus-Bandbreitenplanung auf HANA

Cockpit KPIs Date

Cockpit KPIs Date Market Growth Asia America Europa -1% -1% -1% in bn € Confidence Revenue 14 54% 0% 0% 0% EBIT 2.1 46% 1% 1% 1% 2% 2% 2% 3% 3% 3% 4% 4% 4% …. Resource Prices New Competitor Asia America Europa A B C A B C -5% -5% -5% -2% -2% -2% … … … -4% -4% -4% -1% -1% -1% … … … -3% -3% -3% 0% 0% 0% … … … -2% -2% -2% 1% 1% 1% … … … -1% -1% -1% 2% 2% 2% … … … 0% 0% 0% 3% 3% 3% … … …

THERE IS A LOT OF DATA THAT CAN BE USED RISK MANAGER COLLABORATION SCENARIO EXPLORER RISK ESTIMATION DASHBOARD SIMULATION SCENARIO CUBE VALIDATION EXCEPTION ENGINE DWH DWH-INTEGRATION MARKET DATA ESTIMATION WORKSHOP WISDOM OF CROWDS

Why Risk-adjusted Planning will gain importance! Industries (Excerpt) Manufacturing Aviation Banking Utilities Chemistry & Pharma Demand Yield Stresstest- Demand Demand Planning Planning calculation Forecast Planning Resarch & Techn. Inventory Market Develop- Investment Margin Development Planning ment Forecast Planning Simulation Forecast Traffic CoRep-Data- Net Capacity Collaborative load Analytics Planning Forecasting Creditor Energy R&D-Invest- Rating Generation ments Sales Energy Trading Distribution Planning Forecast Planning Controlling Corporate Forecast Contract-bsaed Margin Volumen SCORPlanning Corporate Risk Material and Management Inventory Mgm Churn Prediction

Why Risk-adjusted Planning will gain importance! #1 Success Factor: Understanding the Markets 74% of international CEOs are ranking the ability to understand market and their risk better #1 Factor for winning markets Make Risk Management operational! Use the existing Risk Management Budget for a better integration into business planning and with that – into business decision Avoid expensive Mistakes! React even in running „flight mode“. Simulate occuring risk and see potential reactions Promote Planning to be a Decision Enabler! Make Planning more then just a Plan vs. As-Is Comparison. Use the Scenarios to let Planning become a decision enable Increase Decision Competence in your Management! Building Scenarios has also „educational benefit“. The highest learn curve is the modeling of Scenarios

… AND INTO THE INCREASE IN PLANNING MATURITY Stage 1 Stage 2 Stage 3 Stage 4 Stage 5 Ad-hoc Diskussion Absprachen entlang des Planungsprozess Entscheidungen integriert und dokumentiert Entscheidungsprozesse teilweise abgebildet Weitgehend integriert und dokumentiert Telefon / undokumentierte Meetings Word & E-MailAnhänge / Planungsordner Integrierte Kommentare Abbildung Workflow Kollaborative Prozessunterstützung Dreipunktschätzungen Planungswerkzeug mit Szenarienverw. Nachgelagerte Betrachtung von Einzelrisiken (Wechselkurse) Risikoadjust. Szenarioplanung Berücksichtigung von Szenarien erst bei Eintritt Kommunikationsprozess IT-Unterstützung des Prozesses Berücksichtigung von Szenarien

„ More than into the past, I am interested in looking into the future – since this is where I want to spent the rest of my life „ - Albert Einstein

OUR TEAM HERE IN INTERLAKEN Selim Oral Managing Director, cundus Switzerland AG Over 20 years experience in Business Intelligence in Switzerland in leading positions Selim.Oral@cundus.com Ralf Heim Corporate Development Manager, cundus AG Corporate Strategy and Positioning of innovative Solutions in BI Ralf.Heim@cundus.de Jürgen Roider Senior Manager, cundus Switzerland AG Business Development and support of strategic accounts in Switzerland Jürgen.Roider@cundus.de 3 rd RICHMOND FINANCE DIRECTORS‘ FORUM

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