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Investment Governance Resources

The complete guide to best practice systems and processes for the successful management of strategic initiatives.

Corporations of all sizes face an unprecedented range of opportunities and challenges.

From increased competition driven by globalization to opportunities to address new markets and accelerate innovation, companies must continue to execute at a consistently high level while focusing on investing in areas that provide the capabilities required for continued growth and success.

Organizations that can be consistently effective in making and managing decisions concerning strategic initiatives will demonstrate the focus and durability necessary for long-term success and market leadership.

However, best in class investment governance requires a set of systems, processes and tools that enable the entire enterprise to align on what is needed to master this discipline. Inpensa focuses exclusively on providing the technology and services to create a best practice platform configured to the needs of each institution.

This guide will cover everything you need to know about business case standardization and automation.

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Investment Governance Process

First, and perhaps most importantly, a well thought out process for high-impact investment governance capability is needed.

Instituting corporate standards defines clearly the process and when/how it is to be applied.Just a few of the areas organizations should address with standards include…

  • Definition of when a potential expenditure is subject to an investment governance process
  • Details of governance processes for different investment types; for example, level of financial commitment, areas of operational impact, the potential for impact on operating results, any relationship to regulatory or corporate compliance mandates, etc.
  • Expectation of types of information required for costs, benefits, and qualitative context to provide background on initiative description and alignment with overall corporate strategy

Digital Investment Governance Framework

While some organizations may have thoughtfully considered the ideal investment governance process, the vast majority attempt to implement it in a manual, off-line manner.

Spreadsheets, slide presentations, and manual workflow typically characterizes this approach.  As a result, even the best-architected processes often fall into disuse. They are too cumbersome to support and manage.

Lack of high confidence and real-time information makes executive reliance on data for decision-making difficult.

Therefore, the key for companies seeking to transform investment governance processes into a sustainable competitive advantage is end-to-end digitization in a comprehensive framework that standardizes everything from the capture of data and related information, to assessment and decision making, to tracking of results.

Business Case Management

Especially relevant to a digital investment governance framework is a comprehensive business case management definition that captures important industry and corporate attributes stakeholders can use to build, assess, action and manage strategic initiatives through the entire life-cycle.

Standards are Fundamental

A business case template should capture the data, metrics and information fundamental to an organization’s decision-making process using a standard set of naming conventions, or taxonomy. 

This framework ensures executives and all parties involved have a consistent understanding of essential details that can be referenced easily at any step of an initiative life-cycle. Companies need to use this information at both the individual and aggregate levels across programs, business units, geographies, and other perspectives, such as alignment with corporate strategies.

For example, essential standards to incorporate into a business case management process include:

  • Metadata elements, such as values for items like initiative ID number, business unit, and regional alignment, investment category, and whether discretionary or non-discretionary, to name a few
  • Alignment of specific categories and general ledger accounts across cost and benefit types
  • Treatment of operating expenses compared with capital expenses, including a guideline for determining when and how to capitalize non-labor and labor costs, with details of standard depreciation schedules and in-service periods
  • Definition of critical financial benefits and metrics, such as internal rate of return (IRR), net present value (NPV), return on investment (ROI), and others harmonized for consistent calculation across all initiatives, along with an approach to capture non-financial business results in terms of key performance indicators

With a standard, template approach to business case management, organizations can drive greater efficiencies and high quality, more timely decision making through automation.

Investment Governance Automation

A comprehensive digital framework centered on a robust, standard business case template creates an excellent opportunity for compounding value for the enterprise through automation.

Data Creation

Automation streamlines data capture and enhances data quality by presenting users with the information and guidance needed to rapidly assemble a business case consistent with the underlying governance model.

Presenting users with only those choices appropriate, such as categories valid for one-time expenses or items eligible for capitalization, speeds the business case creation process and makes it easier for participants across the organization to collaborate in real-time while working independently.

For capitalized items, automation can drive the creation of depreciation and amortization schedules, so that a real-time view of both cash and P&L impact is always available.

Further, a robust approach to automation can progressively present a user with only relevant information for a specific business case that, in part, might be driven by a high-level cost estimate or another attribute selection.

Workflow

Investment governance automation can address workflow to drive analysis and action across the entire life-cycle of an initiative.

Workflow routing can drive efficiencies by eliminating the latency associated with manual email or portal-based routing.  It enhances effectiveness, as well, through the inclusion of workflow roles that drive conditional routing based on characteristics of an initiative, such as commitment level, approval chain, or based on business unit or regional alignment, for example.

Roles and Access Profiles

Furthermore, investment governance automation may also feature role-based access profiles that, when defined with appropriate rules, determine whether an individual may view, increment, or otherwise change information relative to where an initiative stands in the overall life-cycle.

Perhaps a financial analyst may be able to view and edit cost information through the initial management approval step but subsequently is limited to view only access unless changes are requested by an executive further in the approval chain.

Capital Planning

Whether done cyclically, as part of an annual process, or on an ongoing quarterly or even monthly basis to track balance sheet status, an effective capital management framework is fundamental.

Capital planning is an iterative process, often involving collaboration and negotiation between multiple parties from the specific standpoint of proposed capital expenditures.

Many organizations implement a process focused solely on capital expenses and balance sheet implications; in contrast, others look holistically at the capital expenditure planning process from a balance sheet and cash view, as well.

Core Capabilities for Capital Planners

In any case, a comprehensive capital planning framework needs to include the capability to manage multiple passes of a capital plan.

Current versions of business cases need to be easily accessible, along with versions of business cases associated with prior plan iterations.  Visibility to all versions helps planners assess current commit levels for capital allocations with requests from initiative owners for current and prior plan passes.

A reliable capital planning process serves an organization further by working “hand in glove” with overall portfolio management, providing a complementary strategic perspective.

Portfolio Management

Analysts and decision-makers can leverage the robust taxonomy used to standardize business cases to understand how individual proposed projects or programs support significant objectives.

With each business case defined with appropriate terms, analysts can assess portfolios from multiple perspectives relative to available resources to run scenarios and determine which projects fall above the line and can be accommodated based on current budget guidance.

Typical Analysis Scenarios

A robust business case taxonomy and a comprehensive portfolio visualization tool makes it easy to illustrate a variety of scenarios, such as:

  • Strategic value
  • Most favorable metrics, such as NPV, ROI, IRR, or others
  • Greatest financial benefits
  • Enablement of corporate capabilities targeted for enhancement
  • Alignment with strategic objectives
  • Run-the-business versus change-the-business orientation

Contingency Planning

More than ever, tools for ongoing budget optimization, must provide the means to manage uncertainty and market dynamism.

Companies must be increasingly sensitive to the need to rationalize spend through a responsive, reliable contingency planning network.

A manual investment governance process makes it difficult to impossible for organizations to provide the near real-time responsiveness necessary for contingency planning to have maximum impact at the point of need as circumstances dictate.

However, ongoing analytics on the state of spend enables experts to be at the ready and able to precisely forecast savings opportunities and impact by an immediate focus on things such as:

  • Discretionary versus non-discretionary spending
  • Non-committed projected spending for the corresponding target periods
  • Impact across target periods based on elimination or delay of cohorts of projects parsed by criteria, such as low/medium/high priority or others as defined in the business case template

Sustainable Cost Reduction

Business case standardization, interactive capital and contingency planning, and overall portfolio analysis across multiple scenarios provide organizations with powerful tools to drive sustainable cost reduction.

Accelerating these capabilities by creating an end-to-end framework with underlying automation positions organizations to drive continuous improvement and best-in-class results overall.

Organizations fund strategic initiatives

Benefits Tracking

A comprehensive digital investment governance framework enables stakeholders to compare benefits realized with benefits contemplated at the time of initiative approval.

By assessing the plan/forecast/actual view of benefits along with the corresponding cost side, full transparency to decision-makers and team members alike is the result.

Extending benefits tracking to review and certify measurable business outcomes drives accountability. While not financial, these outcomes, which are many and varied, are critical to monitor and assess.

An automated digital investment governance framework allows business owners to review and certify benefits in a high-fidelity, timely manner.  Decision-makers receive an appropriate context for financial data at the general ledger or sub-ledger level.  Also, leaders gain further ability to discreetly track and understand benefit types where data do not exist as credit/debit entries in company financials, such as cost savings.

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Finally, a governance framework enables tracking intangible benefits, which can be critical to management in the demonstration of corporate culture and commitment to employees, management, customers, shareholders and related parties.