Strategy & Corporate Finance

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Empirical Evidence

Creative data mining enables us to produce privileged insights and finely calibrate strategies that we know work; these are not simply theoretical claims backed by a few cases but rather statistically valid ones based on large-sample learnings from nearly 100 years of experience.

Bigger, Bolder Bets

Uncertain times demand bold responses, yet many large corporations tend toward timidity and inertia. To be successful, companies must make bold moves to unlock new sources of growth. Making the right moves involves using granular analysis to choose the right submarkets, and upending the traditional approach to planning by reallocating resources—people, money, and management—to new areas.

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People — The Social Side of Strategy

Great strategy moves beyond analysis into an immersive journey where teams grapple with the issues, integrate a range of perspectives, and explore their own myths. This process can be challenging, but it creates the deep conviction people need if they are to commit to a bold new direction.

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Top 5 Engagement Topics

ENVIRONMENT


1. Sustainability of end products
2. Environmental management of operations
3. Water-related issues in operations and end product
4. Sustainability of raw materials sourcing
5. Responsible investing programs and initiatives

SOCIAL


1. Diversity/evidence of meritocracy
2. Society and local community relations
3. Employee safety and treatment
4. Regulatory initiatives driven by ESG factors
5. Safety of end products

GOVERNANCE


1. Diversity/evidence of meritocracy
2. Society and local community relations
3. Employee safety and treatment
4. Regulatory initiatives driven by ESG factors
5. Safety of end products

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Corporate and Capital Markets Strategy

In our experience, well-executed strategies that reflect value creation and the appropriate risk considerations are crucial to success. Working with the Strategy & Trend Analysis Center, we help our clients maximize value creation by aligning their corporate strategy with the capital market's perception of where the value lies, communicating that strategic intent, and crafting a compelling story for investors. We support our clients in the following areas:

Capital- Markets Analysis

To determine which strategies and business models create the most value.

Active Portfolio Management

To fund corporate growth and maximize long-term value.

Investor Communications

To explain corporate strategy clearly, manage performance expectations, maximize shareholder value, and anticipate the perspective of activist investors.

Innovative Financing Strategies

To build value.

An Example of ESG Complexity in Credit Analysis

The inter-related nature of ESG and other fundamental risks also magnifies the complexity. A recent bankruptcy in the utilities industry provides a stark example. The utility, a high credit quality issuer, suffered cascading losses due to a confluence of drought-heightened fire threat (E), an unsupportive regulator and diminishing societal tolerance for corporate bailouts (S) and management/board mistakes (G) that drove the company to seek protection from its creditors.

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Value-Based Management

CFOs play a crucial role in aligning stakeholders so everyone sees value creation through the same lens. As the CFO is also at the helm of value-creation efforts company-wide, he or she can use the finance function to test new ideas and set best practices.

We support our clients in several areas:

To apply rigorous analytical tools and methodologies that assess business value and performance.

To enhance the structure of the function to enable greater focus on business support and value creation, using proprietary diagnostic tools and COE and SSC solutions.

To optimize the practices and performance of the finance function to drive productivity and effectiveness.

To help shape the talent strategy, build talent systems, and develop leaders through capability-building Finance Academies to create a world-class finance function.

To help define the role, responsibilities, and agenda of the CFO, including the role of working with the leadership team and the board and leading enterprise-wide initiatives such as guiding digital transformations and embracing the opportunities provided by big data and advanced analytics.
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Resource Allocation

We've found that highly successful companies are consistent and dynamic resource reallocators. These companies continually grow by investing in existing businesses, developing or acquiring new businesses, and exiting unprofitable ones. They are more resilient in the face of increasing change, more likely to stay independent and create more value, particularly in turbulent economic times. Yet most companies are slow to move resources between businesses.

Every year they stick to the same processes for strategy development, capital planning, talent management, and budgeting, and every year the outcome is only marginally different from that of the year before, and the year before that. To paraphrase Albert Einstein, they do the same thing over and over again but expect different results. We help clients design more effective strategic planning and budgeting processes so that they can overcome the inertia that stalls growth and prevents the active reallocation of resources. We have developed proven tools and techniques to help executives shake up the status quo and overcome the processes and behavioral barriers that stand in the way of dynamic portfolio renewal.

Strategic management and planning

Companies often struggle with their strategic management and planning processes. It can be challenging to reconcile the pressure for short-term returns with long-term strategic goals, and it's difficult to build the capabilities needed to execute strategies. We help companies strengthen their strategy-development processes, make better decisions, and then act on them. We can assist clients with solutions to specific issues or design a whole new approach to strategic management and planning.

We know winning strategies are built on more than optimistic timetables; they are based on bold, unbiased decisions. Building processes that draw upon behavioral strategy reduces the impact of cognitive biases—excessive optimism, groupthink, and loss aversion—that can affect critical decisions made by even the most experienced managers in the best companies. We also help clients determine who should be managing the strategic planning process. To support teams, we develop bespoke solutions tailored to a company's culture, organizational structure, team responsibilities, and processes.

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“Corporate Performance Analytics is a digital platform for benchmarking financial performance data, developing strategies, and uncovering insights for data-driven decision-making.”

We support others who are protecting the planet

Beyond our own footprint, we seek to use our knowledge and capabilities to support others who are working to improve the environment. For more than ten years, Partfield’s research has provided a fact base on emission-reduction opportunities and their associated costs and investment needs. We put our research into action through pro bono support of environmental, not for profits, and, most recently, through the work of Partfield org. Through its flagship initiative Rethinking Recycling, this Partfield founded not-for-profit is developing new recycling solutions that will put all waste to productive use for the benefit of communities and the environment.

We are also engaging our suppliers to help reduce their footprint. We have made this a core topic in commercial conversations with more than 50 of the world’s largest airlines and five large hotel groups, and we are continuing to work with them to strengthen their environmental performance. Together, these suppliers account for nearly 65 percent of our carbon footprint.

HOW CORPORATE PERFORMANCE ANALYTICS HELPS COMPANIES.

In today’s data-rich financial world, companies rely on disparate sources for data about peer performance, industry performance, and economic health.


These data sources provide a flood of data with varying frameworks and structures, leaving companies without a single source of truth to base their decisions and uncover valuable insights.

Corporate Performance Analytics solves this problem by providing reliable, standardized performance data and automating financial analysis.




How ESG is Integrated into Our Investment Process

Equity

We holistically asses the importance of numerous EsG factors relative to other fundamental operating drivers

We believe ESG factors are essential to the comprehensive analysis of a company. At the same time, a focus on ESG factors alone could omit critical details about controversies br or valuations

We seek to invest in companies with sustainable business models and strong competitive positions, at reasonable prices, in the belief this will result in competitive performance over the long-term

The key to our success is identifying both emerging and deteriorating sustainability with a keen focus on valuation using rigorous fundamental analysis

Our integrated approach is complemented and strengthened by leveraging the exensive resources of our global organization, including members of our dedicated ESG team

Fixed Income

We believe integrating ESG factors into a fixed income investment process can provide tremendous advantages

In fixed income, different maturities, liquidity conditions and credit quality provide opportunities for competitive advantages over traditional credit risk assessment

We believe intentionally integrating ESG factors into a robust credit research process can help identify short- and long-term risks, avoid capital impairment and capture relative value opportunities for our clients

We believe aa fundamental framework that integrates opportunities, risks and insights can help investors pursue enhanced return and social responsibility




Return on Invested Capital decomposition over time

Corporate Performance Analytics focuses on the drivers of value creation. Other analyses include:

  • Total return to shareholders

  • Cost of capital

  • Enterprise value decomposition and multiples

  • Economic profit decomposition

  • And more…

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WEF-Nexus Signals in the Investment Process

From an investment standpoint, water, energy, and food are each important considerations, but the emergence of water issues is often a catalyst for swift regulatory intervention. Water markets are relatively underdeveloped compared with energy and agricultural commodities and are far less pene-trated by private industry. Consequently, price signals may not emerge until resources are significantly constrained, render-ing them unreliable. The mismanagement of water resources is difficult to reverse. Since prices are a lagging indicator of scarcity, regulatory responses can be drastic once the crisis becomes apparent. As the pull on this finite resource pushes more and more regions into water scarcity, we anticipate greater intervention from governments as they struggle to manage their water, energy and food resources. In turn, this is likely to have a knock-on effect for the energy, utility, and transportation sectors as well as other sectors that are indirectly exposed to the WEF-Nexus.

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