Capital efficiency in a volatile market
Stop burning capital
It is hardly surprising that financial executives are challenged with capital deployment today given the financial, political, and regulatory uncertainties buffeting markets worldwide. Some global companies add to this uncertainty by spreading capital evenly across geographies under a “what works in North America works elsewhere” approach. Besides coping with the upheavals of external market conditions, they may also struggle with internal issues, such as cultures with entrenched habits, which might be even more difficult to address. How can financial executives overcome these challenges in their capital planning and deployment processes?
Framing capital deployment decisions
An essential element of a holistic approach to capital deployment is a structured process for framing decisions effectively and establishing processes and controls so that those decisions are carried out as planned. Effective decision framing has three key ingredients:
- Assembling the right stakeholders helps facilitate an organization’s ability to develop a comprehensive perspective about the potential values and risks of proposed capital projects
- Creating a good brainstorming environment allows participants to speak openly and honestly about risks
- Asking hard questions leads to sounder decisions- How can this project turn out worse than expected? How could your assumptions be wrong?