Preparing the finance community of an automotive supplier for the requirements of the capital market
STARTING SITUATION – STUMBLING TOWARDS THE CAPITAL MARKET
Our customer, an internationally active automotive supplier, needed some additional liquidity from the capital market for upcoming investments. However, the company’s segment reporting in particular did not correspond to management aims. Neither the financial organization processes, nor the standard reporting used complied with the requirements of the capital markets. A number of issues were open, in particular the matter of managing the expectations of the capital market and integrating them into corporate planning. At the same time, the financial organization was under a high level of operational pressure, and had little experience in communicating with the capital market. Nevertheless, time was pressing.
PROJECT APPROACH – CLEAR STRUCTURES AND TRANSPARENT REPORTS CLEAR THE WAY
The performance gap with capital market expectations was established as a benchmark for medium-term planning. As a second step, the top-down target-setting process was linked to the external capital market and competitor perspective, and aligned the responsibility structures with it. Using the business portfolio perspective, each business division was assigned a clear investment story for capital allocation and communication with the capital market. Target-setting and capital allocation became a fixed link between long-term, medium-term, and budget planning. After that, a direct connection was established between value-based controlling and the incentive system.
FINDING – SEEING TRANSPARENCY AS AN OPPORTUNITY
Without a doubt, one of the most important tasks on the road to the capital market is getting the financial organization in shape to meet forthcoming expectations – because the financial flexibility offered by access to the capital market is counterbalanced by the need for greater transparency.
Here, it is critical that the company sees this transparency not merely as a necessary evil, but as an opportunity to increase internal efficiency.
- The finance community is ready for the capital market
- Active management of expectations through targeted communication
- Effectiveness increased by strengthening the internal products of the financial organization