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Planning and budgetingin VietnamTop Challenges and Solutions

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Agenda • What Setting the • Why scene • Challenges • Overall concepts Best • Best practices practices • Approaches Examples of how technology helps Your • Question’s you asked Q&A’s • … and some answers Question formsPwC and TRG International 2

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Setting the scene Bart Ziemerink Associate Director Consulting, PwC Vietnam Bart leads the Enterprise Performance Management (EPM) team in Vietnam. He was involved in the development of the global PwC EPM framework and approach. Prior to joining PwC in Vietnam in 2011, Bart worked for PwC in the Netherlands and Malaysia. He has advised clients in various industries, published articles and spoken at different events on performance management topics.PwC and TRG International 3

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What is Planning, Budgeting and Forecasting? • Top down development of 3 to 5 year plans to deliver long term value creation Planning • Considers a balanced set of financial and non financial measures • Provides the basis for targets cascaded to the BU and OU level • Enabled through modelling technology to evaluate consolidated business as usual and project scenarios • Annual budgets are the financial representation of the organisations activity based business and project plans expressed as a profit & loss, Budgeting balance sheet and cash flow statement • Focused on the activities required to deliver against strategic targets • Forecasting focuses on actions to bridge performance gaps • It is largely driven out of the typical month end management reporting Forecasting process • In addition, it should encompass new knowledge regarding the external environment and additional factors that may impact performancePwC and TRG International 4

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Attributes of Planning, Budgeting and Forecasting Strategic Business Activities Financial Operational Fixed Horizon Planning, Budgeting Cycles and Forecasting Rolling Horizon Top-down Bottom-up Blended Process Flexible Zero-based Beyond BudgetingPwC and TRG International 5

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Why do we all Plan, Budget and Forecast? Planning & Budgeting for most organisations is the single most expensive of all Finance processes, with a lot of hidden costs, too much detail and poor system support. However it doesnt need to be so expensive. To spend money? Number of man days spend on creating the budget To keep everybody busy? An median company with $1 bio. 25,000 To set targets for bonuses? Best in class company 700 (Numbers from Hackett group) To adjust direction? To influence behaviour?On the other hand Planning & Budgeting should lead to the To drive action?value creation that is expected by the organisations owners. It is the most important of all Finance processes. To beat the competition? In most cases > 50% of Enterprise Value is ‘Future Value’ To create value more (= value that can not be explained based on future cash flows from current activities) effectively and efficiently? PwC and TRG International 6

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What are the Top challenges you shared with us? Weak or no alignment between strategy, planning and budgeting. They are all done in isolation Lagging behind: a call for more rolling techniques Limited technology: the search for an effective planning & budgeting systemPwC and TRG International 7

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It starts with your Strategy Planning & Budgeting Mission Target setting, Vision Translate value Forecasting planning & budgeting drivers into driver based plans & Strategic related budgets to objectives Strategy focus your Map business planning Value drivers on strategy Analyse & evaluate results Adjust planning versus planning & forecasting and forecast Translate mission, vision & strategy & values into strategy maps showing what to focus on to manage your Translate value business performance drivers into KPI’s Dashboard (e.g. KPI’s at several levels in Balanced Scorecard) your organization to focus your business reporting Periodic Management and Operational on strategy Reports Organisation Processes People Data TechnologyPwC and TRG International 8

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Key Value Drivers enable you to focus the entireorganisation on executing the strategy by consistentlyasking one single question... Use as table of Use as guide for content for prioritising Strategy Map Use as an investment proposals business plan agenda for (yearly) planning Check projects on their value add to What did you do to the strategy improve performance on one or more of the Communicate drivers delivering strategy to all your strategy? Use for appraisal Use as guide for and rewarding of determining employees information need Use as starting point for reportingPwC and TRG International 9

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By translating value drivers to KPI’s, setting targets on those KPI’s and defining actions and related budgets to reach those targets, your budget will be entirely focused on strategy executionStrategy Map • A good strategy map “tells the story” of your strategy by showing the cause-and-effect relationships between your value drivers and your strategic objectives. It is the cornerstone of your Performance Leadership potential. • Joint development of your strategy map will enable your management to immediately use the created insight in what drives your strategy to manage the organisation. Value drivers KPI’s Targets Initiatives Budget Measurable factors Measurement Level of desired Main initiatives to Financial mandatethat impact strategy of success in realising success or indication realize objectives needed/given toexecution and create the strategy improvement execute these value potential initiatives 1 2 3 4What do we really How do we know if How good do we What initiatives What do we need / have to excel at to we are actually need / want to be at are needed to reach want to invest toreach our strategic excelling at this? this? our target? reach our target? objectives? PwC and TRG International 10

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