Financial Accounting and Business Management

“Corporate value” is undergoing dramatic change. What KPIs should companies use against which challenges for management control purposes, and to advance disclosures with external parties?

ABeam Consulting focuses on the role of “non-financial capital” in contributing to driving corporate value. Non-financial capital will be an important source of future corporate value. It is at the core of the stakeholders’ “growth expectations” for companies. Companies must form close connections between non-financial capital and their vision, corporate strategy and business plans, and execute on management controls. They must also advance disclosures and dialogues with external parties to convey the appeal of those items.

There are also cases of companies where it would be difficult to claim there is a “close connection” between their qualitative disclosures and their corporate vision or business strategy. This results in setting KPIs that are only slightly related. One major challenge is that companies are aware of the difficulties in “quantitatively” understanding the products of increased non-financial capital. They struggle to integrate cost-benefit measurements, KPI setting, accomplishment indicators, and management targets.

To address these issues, companies must create frameworks that enhance management decision-making and drive corporate value by taking advantage of the latest digital technology to gather, store, and analyze relevant non-financial information.

The demands of markets and people’s work styles are changing at an accelerating pace, and companies that want to remain industry leaders must make rapid management decisions while keeping an eye on competitors.

CFOs must perform future action planning (xP&A achievement) that focuses on discrepancy analyses of budgets and future developments (forecasting) incorporating coherence across all operational domains, and on discrepancy analyses of budgets and projections (figures adjusted by incorporating future development of measures). They should avoid the old model of budget management based on separate operations (comparison of budget vs. actual costs). In action planning, companies must run multiple simulations and make feasible decisions, however, frequent and high-level execution of such operations in a typical spreadsheet program is impractical in terms of operational burdens, adjustability, and management.

Companies must pursue operational transformations to enhance xP&A, and they must take advantage of cutting-edge technologies such as AI predictive features to meet such challenges.