Home > News > Risk > Enterprise-Wide Analytic Strategies Increase Odds of Greater Financial Growth
Risk

Enterprise-Wide Analytic Strategies Increase Odds of Greater Financial Growth

Survey finds double-digit growth of more than 15% in revenues and operating margins, as well as improved risk profiles.

A survey of 1,500 global C-level executives found that once an analytics strategy is rolled out at the enterprise level, there is a greater probability of double-digit growth.

The study, Data & Advanced Analytics: High Stakes, High Rewards, prepared by Forbes Insights in conjunction with EY, New York, found that 70% of leading organizations use advanced analytics to overhaul their businesses. It also found that advanced analytics drives double-digit growth of more than 15% in revenues and operating margins, as well as improved risk profiles. In addition, half of the global executives surveyed plan to allocate at least $10 million over the next two years toward analytics strategies. The report fielded responses from more than 1,500 global executives from companies with at least $500 million in annual revenues.

Specifically, the report found that organizations with a well-established and integrated analytics strategy considered their competitive ability in data and analytics “market leading.” Of these organizations, 66% achieved revenue growth greater than 15%, while 63% reported that operating margins increased more than 15% in 2016. In addition, 60% of these companies said they also improved their risk profiles. Given this success, companies said they were going to spend in excess of $10 million on data and analytics over the next two years, the report found.

The top users of analytics also showed major gains in revenue growth, operating margins and reducing their risk profiles. Specifically, 66% of the leaders in analytics improved their revenue growth more than 15%, while 63% grew their operating margins by more than 15%. And 60% said they reduced their risk exposures.

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In terms of competitive differentiation among the companies using advanced analytics, the study found that the most proficient were mature companies that used their data analysis and collection efforts company-wide. One of the biggest detriments to achieving data success was a lack of cooperation from the management committee.

Other results of the study found that 70% of the top performers of analytics used the data to overhaul strategy and improve their competitiveness. Of the top performers, 75% used a full array of analytics within a specific framework. Of these, many used artificial intelligence and other predictive methods for scenario modelling.

Where there are demonstrated benefits to advanced analytics, the greatest stumbling block to implementing an advanced analytics program was “around the human element, not the technology,” the study said.

“Collaboration, culture and skills were cited as key hurdles throughout the business lifecycle, creating a wider divergence between organizations that are focusing on the people aspects – and separating winners from losers,” according to Bruce Rogers, Forbes’ chief insights officer. One reason was that data and analytics did not flow smoothly around the company, from department to department.

Benefits of Advanced Analytics

Relying on predictive financial analysis can help CFOs rely less on transaction data and more on using sophisticated analytics to gauge the impact of different strategic directions. This improves risk management and thus the chances of financial success, according to the company.

The company also said on its website that “sophisticated predictive analytics will allow the CFO to generate value from data insights and change outcomes based on that insight” and that improved analytics “will be the bastion of the successful CFO and their highly-skilled finance team.”

To become an analytics-driven CFO, the firm recommends that the CFO team be able to predict various financial and risk scenarios, and then develop test scenarios to minimize risk or capitalize on opportunities. They also suggest that “micro-insights” be encouraged from all levels of the company, since these can deliver the greatest benefits.

By Chuck Epstein

Home > News > Regulation > Hermes Proposes Corporate Governance Reform for Private Infrastructure
Regulation

Hermes Proposes Corporate Governance Reform for Private Infrastructure

Approximately half of Great Britain’s national infrastructure pipeline is expected to be financed by private investors between 2015 and 2021.

UK-based investment manager Hermes Investment Management has proposed an enhanced corporate governance code for private infrastructure assets.

Infrastructure services have traditionally been provided by publicly owned entities and national governments, but as Hermes points out, approximately half of Great Britain’s national infrastructure pipeline is expected to be financed by private investors between 2015 and 2021.

“Few asset classes are as necessary, or significant, to the daily lives of individuals as infrastructure,” said Peter Hofbauer, Hermes Investment Management’s head of infrastructure. “These businesses provide essential social services, including access to water, energy, health and social care, and vital transport services. In short, they are the basic physical and organizational structures and facilities needed for the operation of a society.”

 The proposal comes after the UK government issued a green paper in November seeking corporate governance reform for public and large private entities. 

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“I want the Government to have an open discussion with businesses, investors, and the public about what needs to be done,” wrote UK Prime Minister Theresa May in her introduction to the green paper. “This is an important task, and one where both the government and big business must rise to the challenge of restoring faith in what they do.”

Hermes’ proposal includes:

  • Board Effectiveness Reviews – “A requirement for infrastructure businesses to periodically and genuinely consider the board’s skills and diversity, the quality of debate and decision making, the adequacy of conflict management processes, and its overall effectiveness in a structured and documented manner.”
  • Independent Chair – “An independent chairperson can provide valuable assistance in steering robust and effective board debate and stewarding interactions between shareholders, the board, sub-committees and management.”
  • A Minimum Number of Independent Directors – UK utilities regulators Ofwat and Ofgem each require the appointment of a specified number of independent non-executive directors to licensed operating company boards. “Such individuals are typically selected based on their sector or industry experience. The presence of independent, experienced industry professionals can provide comfort for investors, end users and other stakeholders.” 
  • Stakeholder Committee – An advisory committee made up of company management, shareholder directors/independent directors and other key stakeholders operating under agreed terms of reference. “While seemingly radical, this would not be a significant move away from existing practices of certain licensed regulated utilities, including certain water companies, which already maintain customer service committees. 
  • Remuneration – Aligning remuneration to matters other than financial returns (such as metrics related to environmental and social performance). “Making this an expectation for essential infrastructure businesses would mean such conversations at remuneration committees are the norm.”
  • Transparency and Disclosure – Clear and transparent disclosure from businesses both for the purposes of risk management and opportunity analysis. “Where infrastructure services have historically been provided by government, key stakeholders would have had the right to certain information.” 

“We believe the time is right for the authorities and the infrastructure industry to consider implementing some or all of the options set out in our paper,” said Hofbauer. “There is a distinct need for initiatives that will deliver an enhanced governance framework for the benefit of infrastructure company boards, shareholders, stakeholders, the public interest, and increase accountability.”

By Michael Katz

Related link: Declining Pensions in the UK

 

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