Capital Market Imperative
With recent events of ethical lapses of accounting firms and
the malfeasance of high-profile executives, investors have a
battered image of the integrity of the securities market. Without
faith that companies are providing accurate information on the
underlying performance of their business, investors will be wary
and turn away from the capital markets. Investors need to be
protected and have confidence that the market is conducting business
in a manner that is striving towards the goal of maximizing returns
for them. To restore the investors' confidence , companies need
to understand the importance of disclosing meaningful financial
and other information in order to help investors evaluate companies'
future financial performance.
EVM is not only an immensely powerful tool for financial planning,
analyzing and forecasting, but also a financial framework which
investors can monitor if the company's on-going performance meets
their expectations. EVM enables accountability, transparency,
and consistency through improved plan accuracy, data integrity,
and performance visibility. Acquiring the trust of shareholders,
EVM helps companies set up the sound ethical standards and disclose
valuable and meaningful information to the shareholders.
Financial performance has traditionally focused on measurement
of a company's historical data, instead of what will create value
for the organization in the future. Today, fundamental changes
are occurring in the way organizations conduct their business.
Financial executives are realizing that reaching their stretched
goals may require a complete transformation of their traditional
budgeting and financial management practices. No longer can the
budgeting and planning process succeed without direct linkages
to the value drivers of the business.
A focused strategic business analysis process can improve management's
ability to anticipate and respond to dynamic market conditions.
EVM helps executives identify and diagnose the value drivers
of their business a nd enables executives to monitor the company's
operation at a single glance. With a shift of focus from historical
to forward-looking real-time information, CFOs can proactively
connect themselves with the front lines of businesses and rapidly
align the organization around new financial objectives and plans.
Furthermore, executives have a comprehensive view of the business
risks associated with each possible course of action. EVM helps
the company stay focused on short-term goals as well as looking
forward in the long run.
Focusing on Business Units
Many companies nowadays include multiple business units, which
rarely share the same growth potential or profitability. It is
important to value each business unit separately or to build
up consolidated forecasts from the sum of individual units. Once
a company understands how to create value in each business by
influencing the value drivers, the next challenge is managing
each business to attain results that are consistent with the
top-down aspirations. Getting a fit between top-down and bottom-up
targets requires iterative negotiation between the center and
the business unit. While this demands more time and energy than
simply dictating targets from the top, the iterative approach
draws more deeply on the business unit managers' expertise and
is more likely to gain true commitment from the entire team.
EVM serves the purpose of translating value metrics, value drivers,
and targets into employees' daily actions and decision-making,
and greatly assists companies to formalize the commitments from
business unit managers, such as performance contracts containing
the milestones and quantitative and qualitative goals they intend
on achieving. EVM helps the company avoid the misdiagnosis of
wrong value drivers and enables the company to grasp all value
The Impacts of the Sarbanes-Oxley
The Impacts of the Sarbanes-Oxley Act of 2002 change the way
corporate America does business. While the Sarbanes-Oxley Act
of 2002 primarily focuses on public companies, it is widely believed
that the Act will have a significant impact on private companies
as well. With the possibility of private companies going public
in the future or merger and acquisition by public companies,
all companies need to ensure the accuracy, consistency, transparency,
and timeliness of financial results and reporting.
With the use of EVM, companies will have an easier time complying
with the Sarbanes-Oxley Act. EVM's planning, forecasting, and
reporting functions makes the process of meeting the strict financial
reporting and management requirements set by SOX easier. EVM
ensures accuracy with a single version of the truth that the
company can rely on and that will address all questions. EVM
ensures timeliness with real-time data for effective decision-making
and performance transparency. Also, EVM promotes consistency
ensuring the reliability and uniformity period over period. Most
importantly, EVM gives understanding and unquestioned transparency
by providing detail and clarity behind the numbers.
Limitations of Spreadsheet Models
Many organizations find their spreadsheet systems frail. Spreadsheets
are great as personal productivity tools, but disastrous as financial
planning, budgeting, and corporate performance management systems.
Spreadsheets only provide a single view of the organization.
Changing or analyzing data takes huge amounts of time and runs
the risk of being wrong due to undetected errors.
EVM takes the planning process beyond spreadsheet, dramatically
reducing planning cycles and increasing forecast accuracy and
data integrity. EVM includes many sophisticated features that
users won't find even in macro- intensive spreadsheets, for example,
organizational planning, built-in different pricing models, multidimensional
revenue forecasting, rolling forecasting, what-if scenario analysis,
etc. These features make the budgeting and on-going financial
planning process more strategic and truly dynamic.
Cost Reduction and Affordability
While growing, companies' financial support processes get unwieldy
and expensive. No one can waste time and money perfecting support
functions that demand growing investment in technologies and
More and more stakeholders expect finance organization to play
a greater role in creating wealth and to transform themselves
from a perceived overhead function to value creators.
With the cost of budgeting, financial planning and performance
management software easily reaching six figures, Governance One's
EVM is an affordable solution at an unbeatable value. With the
capabilities and features EVM has, financial executives can focus
on value-creation activities while reducing cost of their financial