Turning Strategy

               Into Action

Long-term financial planning (three to five years) based on nonfinancial value drivers is required to enable value-based management. SAP SEM supports strategic scenario planning through a planning application that creates results with easy-to-plan, business-specific value drivers. As a result, the number of balance sheet and income statement accounts that must be manually planned is reduced. Consequently, business planners have more time to discuss and reconcile the outcome with strategic business units. Value-based management approaches such as EVA™ require a set of adjustment postings and follow-up activities for subsequent periods. SAP SEM fully supports this approach, using planning applications, data structures, and back-end functions.

Value Driver Trees:

Value driver trees turn key performance indicators into operations controllers through greater differentiation in business-specific value drivers, visualizing these in tree-like structures, and permitting smooth-running simulations. SAP SEM’s value driver tree function enables reporting and simulating dependencies between a selected performance metric and its value drivers. It can provide transparency on performance metrics, such as EBIT, ROCE, or EVA™, using disaggregation into its lower-level value drivers, such as sales, costs, and overhead. The value driver trees help all levels of business analysts in your organization understand how strategic performance metrics are driven by operational and business-specific value drivers. “What-if” simulations are supported with easy-to-apply, on-screen adjustments of value drivers. Actual, plan, and simulation values can be viewed simultaneously in a graphical tree format or accessed using standard SAP BW reports.

Capital Market Interpreter:

In the context of value-orientated business management, it is becoming more important for management to simulate the valuation of management decisions by capital markets in advance, and to assess an alternative course of action for its conformity to their aims. The Capital Market Interpreter is an ideal tool for this kind of analysis.

With Capital Market Interpreter you can;

• Calculate the shareholder value on the basis of cash flows. The starting point for the determination of this cash flow is sales planning in which levels of products are presented, which are aggregated to the level of the profit center in a later step.
• Compare the shareholder value calculated in this way, which results from the internal view, with the value which was calculated by analysts for your enterprise. The Capital Market Interpreter shows the difference between both results as value gaps.
• Receive a graphic presentation of value gap, cash flow time series and time series of value drivers (for example rate of sales growth, EBITDA margin,...).
• Finally, in addition to your own valuation approach and that of the analysts, you can compare a third variant to carry out a "what-if" comparison. Here you can enter the values, which influence the calculation of shareholder value, and have them calculated again.