Solutions From S@R Jan12
•
0 likes•331 views
Strategy@Risk provides strategic risk management software and services. Their models link enterprise strategy to risk management through probabilistic simulation of financial statements and valuation under uncertainty. This allows clients to evaluate risk across strategies, make informed decisions, and increase shareholder value through improved risk management.
Solutions From S@R Jan12
- 1. 1 © Copyright 2006 Strategy@Risk Ltd. All rights reserved Value based Strategic Risk and Performance Management achieves a sustainable increase in enterprise value over time. It represents an important tool for planning as well as for performance measurement and for controlling purposes . “S@R has set out to create models that boost income and save our clients time and money. Our models can give answers to both deterministic and stochastic questions, by linking dedicated ebitda models to holistic balance simulation taking into account all important factors describing the company. The basis is a real balance simulation model – not a simple cash flow forecast model.” Presentation to:
- 2. Why S@R For Enterprise Risk Management (ERM) to be value creating, it must be embedded in and connected directly to the enterprise’s strategy – that is what Strategy @ Risk provides, thus improving ERM through ‘Strategic Risk and Performance Management’ (SRM). The S@R models provide: 1. Platform for comprehensive Strategic Risk and Performance Management and state of the art P&L and Balance simulation models. 2. The possibility to add uncertainty to all variables and calculations, enabling valuation and decisions under uncertainty . 2
- 5. S@R Value Based Strategic Risk and Performance Management 1. Enterprise wide – value based with all areas in scope and supports business decision making 2. All risk categories – financial, operational and strategic 3. Integrated – captures interactivity on a consistent and integrated basis, at enterprise and business segment level 4. Finance oriented ‐‐ Ties finance with risk 5. Aggregated – enterprise level risk exposure and appetite 6. Dynamic planning – to develop and evaluate strategies 6. Decision making – not just risk reporting 7. Risk versus return – mitigation and risk exploitation 8. Risk disclosures – integrates ERM information 9. Value impacts – includes enterprise and value of equity 10. Stakeholder focus – not only rating agency driven 5
- 6. The S@R framework for Strategic Risk and Performance Management Strategy@Risk offers clients a framework and solution that elevates the value of ERM and Business Management in general. Be able to apply the reults for a range of purposes: • Communicate risk • Act on risk/opportunity • Employ Business tactics • Test and improve Strategic decisions 6 Creation of Framework model Implementation of the S&R software Problem Description Simulation and Reporting EBITDA model P&L and Balance model Valuation simulation Forecasts and distributions Evaluation and treatment of Results Systemic Implementation of EBITDA model Data entry template for EBIDA model Data for balance model template Definition of value and cost drivers and their distributions Dependencies ("Correlations") between cost and value drivers Company environment: taxes, interest rates etc Time frame Quantification: Opening balance Inventories Taxes, etc. Legal requirements Interest rates (yield curves) Exchange rates Financial strategy etc.
- 7. S@R models create real value and deliver the insight that makes you capable of improving ERM WHO? WHAT? Strategic Risk Credit Risk Market Risk Operational Risk Board CEO CFO CFO Treasurer Business Unit Manager Internal Audit ISO standards Insurance Suppliers etc Sales Procurement Operations etc Debitors Trading Limits Currency etc. Investments Markets Interest rates Hedging etc. The "Silo" Thinking Regardless of maturety and level of ERM in the company. S@R and leading professionals* advise an initiative focused on Strategic Risk Management. This initiative will create value and ease the exisiting work in ERM projects. • Eliminate silos, avoid and mitigate risk. • Reveal risk in meeting strategic and operational objectives *Mark L. Frigo and Richard J. Anderson , Kellstadt Graduate Graduate School of Business, DePaul University Chicago 7
- 8. S@R adds value • Release resources for other purposes than calculations – gain one tool that can be used for all types of simulations internally. • S@R gives you strategic risk management capabilities that can be aligned with growth strategies, and help companies achieve their business priorities and goals. • Avoid and mitigate risk. • Achieve integration of strategic planning and risk management. • Establish risk tolerance for the enterprise, and align risk appetite both for individual projects/investments as well as for the enterprise. • Improve ways to assess and analyse risk capacity. • Align risk management with the overall business strategy, respond to regulatory demands and improve their modeling and analytics capabilities. • Create shareholder value from risk management. 8
- 9. • Decide how much risk the investor can take? • Decide how much risk the investor need to take? • Evaluate alternative strategic investment options at risk? • Evaluate equity values and enterprise values in acquisitions at risk? • Improve predictability in operating earnings at risk that may impact corporate financial position and performance? • Identify risk tolerance level? • Evaluate optimal financial hedging strategies? • Identify and benchmark an investment portfolio and/or individual business units’ risk profiles? • Develop risk mitigating strategies? • Evaluate the effect of alternative risk retention and risk transfer strategies? Gain insight and analytical power in the intersection of Risk, Strategy and Finance 9
- 10. S@R Generic Simulation Model Economic Regime and Strategy Production Specification EBITDA model Economic Regime Financial Strategy Production Parameters Cost Variables Income Variables Operating Strategy Valuation Strategy Market Variables Simulation Deterministic and Monte Carlo Risk Reports Probability Distributions Deterministic Model Stochastic Risk Model P & L Balance Sheet Economic and Financial Issues Valuation Issues We deliver: A Monte Carlo simulation model tool that easily links to your report and consolidation tools. A customer tailored simulation model ready to use for a range of problems. Or standard industry models. Services ensuring implementation, user friendliness and training of key personnel. We understand, design and implement with no strain on the organization – you are up and running in short time with our full support. http://www.strategy-at-risk.com/2009/10/19/ where-do-you-go-from-risk-mapping/ 10
- 11. P&L and Balance Simulation Investments Financing / Currency / Macro EBITDA Taxes Equity Value Enterprise Value Profit & Loss Balance Sheet 0 50 100 150 200 250 90 115140165190215240265290315340365390415 Interval Upper LimitFrequency 0 10 20 30 40 50 60 70 80 90 100 Probability(%) 0 20 40 60 80 100 120 276281286291296301306311316321326331336341346351356361366371 Interval Upper Limit Frequency 0 10 20 30 40 50 60 70 80 90 100 Probability(%) 0 20 40 60 80 100 120 276281286291296301306311316321326331336341346351356361366371 Interval Upper Limit Frequency 0 10 20 30 40 50 60 70 80 90 100 Probability(%) 0 20 40 60 80 100 120 276281286291296301306311316321326331336341346351356361366371 Interval Upper Limit Frequency 0 10 20 30 40 50 60 70 80 90 100 Probability(%) 0 10 20 80 90 100 110 0 0,2 0,4 0,6 0,8 1,0 USD Probability Operating Income Operating Expenses Profit Before Tax Profit for the period 0 10 20 30 40 50 60 70 80 90 100 -65 10 85 160 235 310 385 Frequency 0 10 20 30 40 50 60 70 80 90 100 Probability(%) 0 100 200 300 400 5000 0,2 0,4 0,6 0,8 1 USD Probability Current Assets Fixed Assets Equity Liabilities In the S@R framework all items, whether from the profit and loss Account or from the balance sheet, will have individual probability distributions (pdf). These pdf’s are generated by the combination of pdf’s for the factors of production. Variance will increase as we move down the items in the profit and loss account. 11
- 12. www.strategy‐at‐risk.com Tore Olafsen Senior Partner Email: to@strategy‐at‐risk.com Paal Fredrik Olafsen Senior Partner Email: po@strategy‐at‐risk.com Phone: +47 90775433 12 Strategy@Risk is today a provider of advanced simulation models and services to clients. Our software, models and services are thoroughly tested, works flawlessly, and are used with the satisfaction of clients in Scandinavia and Europe for over a decade. Our cutting edge services and models address, analyze and solve a range of client problems in the intersection of risk, finance and strategy. Making customers better capable to reveal, analyse, plan, communicate and act on Strategic risk. This will increase profitability and stakeholder value. • State of the art analysis incorporating all risk and uncertainty factors • Complete and correct simulation models based on full accounts, financial and strategic regime, full cost, income and production structures • Analysing full effect of strategies on project level as well as consequences for entity/group • More than 60 different financial reports • Recommendations and conclusions on designated topics • Full visualization of findings and results • Tailor made simulation model for client use – or standard industry models • Complete data sets for simulations Per Åkenes Partner Sweden Email: per.aakenes@allevogroup.com Phone: +46 708‐89 89 59