Early Warning System
January 2008
Do you have a clear, objective view of whether your company will meet its forecasted targets? Without a picture of where your business is heading, it is impossible to deal with problems in good time, warns Andrew Mosely.
The role of CEOs, CFOs and other senior executives is really all about managing future performance. Effective corporate performance management is an essential tool to help achieve this objective. By tracking and reviewing key results against targets, opportunities for future improvement can be identified and implemented.
But reviewing historic performance results is only half of the story. To manage the future effectively, directors and their management teams need credible forward-looking information, focused on whether the firm is on track to meet its sales and profit goals for the current financial year and providing early warnings of potential bad news ahead.
Credible forecasts for the financial year are of particular importance for the boards of corporations whose shares are publicly traded. Research on UK profit warnings has discovered that share prices can decline by around 20% in response to a warning. The damage may be such that the company becomes vulnerable to a takeover or shareholders lose confidence in the senior management. For firms owned by private equity investors or foreign parents, the consequences for the CEOs and CFOs failing to achieve their forecasts are similar – they may be out of a job.
To read the full article, click here.
To read the complete Excellence in Leadership Performance Management issue from CIMA, click here.
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Executive Chairman, Global Insurance Broker