Approved Learning Partner

in Egypt and Middle East

 FTP in Banking Workshop

Beacon Holding
Firmly believes that companies and banks that pay less attention to the
new age of connection and treasury management solutions will inevitably
face a critical a lack of knowledge and thus waste countless, promising
opportunities.

Beacon FinTrain
Provides an array of professional business and financial training services

Who we
that stem from improving a corporate’s treasury workflow —all the way to
efficient, finance training programs.

are Beacon FinConsult

Provides a wide variety of highly specialized, financial consulting services
that target fundamentals such as: treasury, investment banking and
financial products— all with masterly foresight and personal attention to
every detail

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Is the first financial recruitment services provider in Egypt and the Middle
East. Dedicated to recruiting the field›s most talented professionals, we
headhunt your gems and elect your corporate’s experts.

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International
Institutions
and Affiliation

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International Certifications

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Certified Corporate FP&A
(FPAC)Professional

By: Sayed Aref

Welcome to FPAC Part I
Financial Planning
& Analysis Certification
Preparation Program
 FPAC Certification

FPAC Structure
Part 1 (13 Topics) Part 2 (12 Topics)
Domain A Domain A
1. Finance Principles & Processes (5) 1. Sales Volume & Revenue Projections
2. Strategy (4) 2. Financial Statements Projections
3. Financial Accounting & Reporting (6) 3. Valuing Projects, Customers, Deals & Products
4. Ratio Analysis (6) 4. Risk Analysis
5. Managerial & Cost Accounting 5. Analyzing Information & Giving Feedback
6. Macroenvironment
7. Microeconomics Domain B
6. Specifying Outputs & Getting Inputs
Domain B 7. Improving the quality of information
8. Using Worksheets & Worksheet Functions 8. Refining Data, Risks, Opportunities & Plans
9. Working with Data 9. Building & refining Models
10. Using Models & Sensitivities / Scenarios
Domain C 11. Making Conclusions & recommendations
10. Information & FP&A
11. Organization Domain C
12. Industry 12. Effective Communication
13. Managing FP&A Projects

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Chapter 2: Strategy
 FPAC Certification

Chapter 2
1 Nature of Strategy

2 Strategic Planning Framework

STRATEGY 3 Strategy & Measurement

4 Risk

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Nature of Strategy
 DCF VC Workshop

https://www.youtube.com/watch?v=TD7WSLeQtVw
https://www.youtube.com/watch?v=z25lC85v9Zw
https://www.youtube.com/watch?v=o7Ik1OB4TaE
https://www.youtube.com/watch?v=VpRNZFuJ_VU
https://www.youtube.com/watch?v=FzBbYhO0X0Q

What is Strategy?

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12
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Chapter 2: Strategy

Topics Overview
• The nature of strategy in an organization and its
significance to FP&A
• The strategic planning process
• Using performance measurement to align the organization’s
actions with its strategy
• Risk frameworks

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 FPAC Certification

Strategy Defined

Strategy

How an organization positions itself

relative to its competition, deploys its
resources and directs its activities to
create and sustain its competitive edge.

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Strategy Defined

Strategy is about clearly defining what you will focus on and how you plan to “win” in your
competitive space. Developing a clear strategy for your organization is vital to its success. Your
entire organization needs to understand it, bring it to life, and execute against it.
clear-cut choices on how to compete

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Strategy Defined

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Nature of
Considerations for Sustainable Strategy (Strategic Fit):
1.Org. capabilities & future (if we come up with strategy but we don’t have
Strategy resources to accomplish, its not going to be sustainable)
2.Industry forces (competitive landscape, market share)
3.External environment

Strategy: how an organization

positions itself relative to its Benefits:
competition, deploys its resources 1. Clarifies decision making (hence clarifies resource allocation decisions)
and directs its activities to create 2. Makes governance clearer
and sustain its competitive
3. Can increase coordination and cohesion
advantage.
4. Can force the organization to stretch

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FP&A’s Role in Strategic Planning

Drive Support

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Three Forms of Strategy

Intended • What strategic planners design at the highest level

Realized • What is actually implemented

• The way front-line managers adapt the intended

Emergent strategy to changing conditions and opportunities

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Sustainable Strategy Considerations

An organization must consider:

• The organization’s capabilities and culture
• Industry forces
• External or macroenvironment

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Functions of Strategy

Clarifies decision Makes governance

making clearer

Can increase
Can force the
coordination and
organization to stretch
cohesion

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The Heart and Soul of Strategy

Mission Value

An organization’s basic Important beliefs or

function in society, in ideals shared by the
terms of the products members of an
and services it produces organization.
for its customers.

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Group Exercise

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Questions

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Question

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Answer

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Question

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Answer

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Question

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Answer

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Question

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Answer

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Strategic Planning
Framework
 FPAC Certification

Strategic Planning Framework

1. Internal
and external
analysis

6. Measure- 2. Goal
ment setting
Mission
Vision
Values
3. Strategic
5. Resource
develop-
allocation
ment

4. Plan
develop-
ment

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Strategic Planning

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Strategy And Core Competence

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Levels of Strategy t be before we have $1

2 Click to edit Master subtitle style

3 Click to edit Master subtitle style

4 Click to edit Master subtitle style

5 Click to edit Master subtitle style

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Differentiation and low cost strategies

2 Click to edit Master subtitle style

3 Click to edit Master subtitle style

4 Click to edit Master subtitle style

5 Click to edit Master subtitle style

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Tools for assessing product / service mix

Problemchild Rising star Cashcow Dog

$ Launch Growth Shake Maturity Decline

-Out
Life cycle
extension

Sales

Cash

Profit

Time (years)

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Break
time

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Strategic Planning Framework

Nature of Strategy (FIT between strategy & org. values).

1.Internal & External Analysis (internal structure & resources,

where we will compete & external factors - SWOT)

2.Goal Setting purposes: influenced by basic components of ROE

(PM, assets turnover, equity multiplier)

3.Strategy Development (Capex, HR dev, technology, etc) →

Strategy Phasing through Horizons of Growth Concept to
plan for the future

4.Plan development: KPIs for each BU, allocate budget to

priorities)

5.Resource allocation: productivity, shifting resources, etc →

Growth Share Matrix

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1. Internal and External Analysis

It is essential for strategic planners to know:
• Whether the organization has the structure and
resources needed to achieve its strategic goals
• Where the organization will compete
• What external factors can influence the outcome

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SWOT Analysis

Internal Strengths Weaknesses

External Opportunities Threats

Advantages Challenges
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SWOT Analysis

Strengths Weaknesses

Internal factors which already exist and have contributed to the current position and
may
continue to exist.

Opportunities Threats

External factors which are contingent events. Assess their importance based on the
likelihood of them happening and their impact on the company. Also consider whether
management have the intention and ability to take advantage of the
opportunity/avoid the threat.

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2. Goal Setting Purposes

Strategic goals
Goals are influenced by 3
primary levers of value: • Satisfy reporting requirements
1. Earnings • Encourage progress
• Signal external stakeholders and
2. Efficient use of assets motivate internal stakeholders
• Provide a rational and systematic
3. Ratio of equity to debt basis for organizational activity
• Measure progress

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3. Strategic Development

Strategic
Specific
Goals
strategic
initiatives
Supporting
strategies

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Three Horizons of Growth

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Horizons of Growth
1st Phase: focus on Org. current businesses – perfecting core skills &
processes.

2nd Phase: Generate values when the 1st phase slows. Finding ways to
apply the organization’s existing strengths to emerging opportunities that
may become core businesses in the future.

3rd Phase: uncertainty phase, new technology development, new markets,

etc

• Continuously strengthen core competencies and competitive position.

• Develop options that can be adopted or passed on as circumstances at the time indicate.
• Train the organization to process change efficiently.
• Learn the “rules of the game” and anticipate competitors’ moves.
• Try a lot of things and see what works.

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4. Plan Development

FP&A may:
• Conduct its own SWOT analysis.
• Set its own goals and targets for the period.
• Implement its own strategic initiatives
• Allocate budget to strategic priorities
• Establish a process for reviewing the function’s
performance and reporting to management.

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5. Resource Allocation

An organization must consider each activity receiving resources and each

allocation decision in terms of its contribution to the organization’s
economic value and its relation to its strategic vision.

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BCG Growth-Share Matrix

High market growth rate

Question
Stars
Marks
Low High
market share market share
Cash
Dogs
Cows

Low market growth rate

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Growth Share Matrix

Higher Growth,
Higher need for cash infusion
Future Indicator

Co. should invest or discard these “?,” Co. should significantly invest in these “stars” as they
depending on their chances of have high future potential.
becoming stars.

Co. should divest these

Milk these cows for cash to reinvest
‘pets’ hifted away from
these enterprises in favor of
stars and question marks. Higher Market Share,
Higher Revenues
Current indicator

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McKinsey Nine-Box Matrix

Investment on basis
High
of growth potential

Selective
Attractiveness
Medium investment on basis
of industry
of earnings

Low Divestment

High Medium Low

Business Unit’s Ability to Compete

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6. Measurement

• Regular measurement of progress in achieving

strategic goals:
• Motivates the organization
• Assures investors and lenders
• Provides an early warning when a strategy is not
working

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Measurement

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Measurement

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Questions

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Question

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Answer

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Question

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Answer

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Question

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Answer

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Question

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Answer

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Question

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Answer

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Question

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Answer

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Strategy & Measurement
 FPAC Certification

Value Drivers

Banking Energy Retail University

• Customer retention • Capital expenditure • Capital expenditures • Tuition payments

• Customer • Exploration success • Store redesign • Ability to attract
penetration rate • New stores endowments and
• Fees generation • Refinery capacity • Attraction of new grants
• Asset quality • Efficiency of shoppers • Operating costs of
• Capital adequacy refinery use • Store sales properties
• Assets under • Proven reserves • Efficiency in generating • Patents granted
management • Costs of developing sales per unit of retail • Community
• Loan losses reserves space satisfaction
• Customer satisfaction
• Use of sustainable policy
guidelines in purchasing

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KPI

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Discussion Question

What is a KPI?

Answer:

A Key Performance Indicator (KPI) is a metric that defines the

performance level needed to deliver value.

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EFQM Model -European Foundation for Quality Management

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EFQM Model -European Foundation for Quality Management

• Adding value for customers through understanding and meeting current

needs and anticipating future needs
• Creating a sustainable future by adopting goals, policies and programs
that consider the economic, social and environmental effects of an
organization’s actions
• Developing organizational capability, or the ability to manage change
• Harnessing creativity and innovation to increase value, levels of
performance and stakeholder satisfaction
• Leading with vision, inspiration and integrity—the ability of management
to model the organization’s core beliefs and ethical principles

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EFQM Model -European Foundation for Quality Management

• Managing with agility so as to adapt strategy quickly to emerging

threats and opportunities
• Succeeding through the talent of people by inclusiveness and
empowerment of members of the organization
• Sustaining outstanding results that meet the short- and long-term needs
of internal and external stakeholders (i.e., producing growth in value,
which encourages investment that can be used to support good jobs
and to provide products and services that meet customers’ needs)

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Assessment Tools (KPIs):

1) EFQM Excellence Model

Self assessment framework for measuring

strengths & areas for improvement.

Provides a framework allowing

organizations to determine their current
"level of excellence" and where they need
to improve their efforts

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Balanced Scorecard as Strategic Tool

Financial Customer
• Increased shareholder value • Quality
• Minimization of risk • Right price
• Solvency • Care

Strategic
Goals
Internal Processes Learning and Growth
• Operational efficiency & integration • Capital investment
• Efficient supply chain management • Knowledge management
• Innovation • Employee communication
• Sustainability • Change management

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Balance Scorecards
FINANCIAL
• Sales growth
• Operating margin
• EPS
• ROA/ROE

PEOPLE CUSTOMERS
• Qualified staff availability MISSION • Loyalty levels
• Retention levels AND • Brand image
• Performance levels STRATEGY • Customer satisfaction
• Employee satisfaction • Customer spend

OPERATIONS
• Inventory availability
• Productivity measures
• % orders on time/in full
• % IT budget on R&D

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Assessment Tools (KPIs):

2) Balanced Scorecard

Provides a summary level view of

Organizational performance and includes
KPIs across 4 main areas.

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Break
time

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KPIs examples:

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Getting the right strategy :

Getting the right strategy means you have to assume your competitors
are damn good, or at the very least as good as you are, and that they
are moving just as fast or faster.” “If the rate of change on the outside
exceeds the rate of change on the inside, the end is near.”
Jack Welch

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KPIs examples:

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Questions

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Question

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Answer

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Question

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Answer

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Question

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Answer

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Question

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Answer

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Question

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Answer

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Risk
 FPAC Certification

Definition of Risk

Risk

ISO defines risk as

“the effect of uncertainty on objectives.”

▪ Its impact can be perceived as quantitative and

qualitative.
▪ Effects may be short-term or long-term.

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Benefits of Risk Management

Implementing risk management processes

helps ensure that the organization deals
with risk in a rational and cost-effective
manner.

Organizations that actively manage risk are

usually more efficient, more likely to

profitable and maintain compliance more likely to secure
transparent. with laws and capital.
regulations.

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Risk Management Process

• Understand org. risk appetite (new industry has high risk, mature industry low risk).

• Identify vulnerabilities & threats.

• Assess probability, impact of those risks (ex: FX exposure to Yen, hm does its volatility impact the firm).

• Select appropriate risk treatment (accept or avoid or mitigate).

• Monitor.

Expected Value = (Probability x Impact)

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Quantitative Risk Analysis

Expected Value = Probability x Impact

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Risk Formula

Risk = Asset Value x Threat Rating x Vulnerability Rating

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ERM Framework

Risk Assessment

COSO
Committee of Sponsoring Organizations Control
Monitoring
Environment
Enterprise Risk Management Framework
2004
Information and Control
Communication Activities

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ERM Framework
• A control environment—the ethical tone of the organization and
the way in which these values are reflected in organizational
behavior
• Risk assessment—setting objectives for risk levels and identifying
risks and vulnerabilities
• Control activities—policies and procedures that support the
implementation of plans to manage risk
• Information and communication—communication of expectations
and rules downward throughout the organization and
communication upward to management aimed at improving
practices
• Monitoring—assessing the quality of the system over time

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Risk Management Process

Understand organization’s risk appetite

and tolerance.

Identify organization’s vulnerabilities

and threats.

Assess probability, impact and

confidence in existing controls.

Select appropriate risk treatment.

Monitor effectiveness of controls and

changes in conditions.

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Classifying Risks

1 2 3
Strategy Operations Financing

4 5
Compliance Reputation

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Types of Risks
• Strategic risk: risk of entering the wrong market, wrong product, country
risk, or sovereign risk—the risk associated with investing in a particular
country (Financial Times Lexicon).

• Operational risk: technology, employees mistakes, the marketing campaign

is ineffective in increasing sales, major quality problem, pandemic affects
the productivity, hurricane disrupts distribution

• Financing risk: get the funds at the right price, interest rate volatility,
trouble in getting financing because of high risk, Capital support, credit
default swap agreement defaults on its obligations. This is referred to as
counterparty risk, the risk that the other side of a transaction will be unable
to meet its obligations (Financial Times Lexicon).

• Compliance risk risks involve the organization’s obligation to comply with

local laws and regulations

• Reputation risk: product recall, security breach.

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Risk Matrix

Impact

Probability

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Risk Treatment

• Accept the risk without further action

• Avoid entirely

• Mitigate (prevent occurrence and/or lessen impact),

Residual risk is the degree of risk that remains after these
controls - due diligence- have been implemented.

• Transfer or share risk

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Risk Management

• Confirm that existing risk management strategies

have been effective in reducing risk to the desired

level

• Identify and manage new vulnerabilities (e.g.,

portfolios that have become unbalanced, difficulty in

hiring talent) and emerging threats (e.g., tighter credit

markets, loss of market share to a new competitor)

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Volatility to Value Matrix

A and Initiative F have near-zero volatility

A has a better value-to-cost ratio, the organization will choose Initiative A.

B and C are promising, but the greater volatility of Initiative C may argue for delaying the investment or structuring it.
D would recommend that it be delayed or avoided entirely.

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Managing Risk

• Organization: how the organization identifies, quantifies

and responds to risk in its planning activities

• Industry: how an organization handles levels of uncertainty

• Macroenvironment: how an organization tracks and

responds to trends as well as “shocks” that can influence its

success

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Business Model Disruption - Definition

• New value & profit drivers (ecosystem, technology, etc.)

• Difficult to replicate – delivers unique value to consumers.

• Breaking a paradigm (rather than improving existing industry products/services).

• Changing the purchase criterion of the consumers.

➢ Blindsiding incumbents &

➢ Destroying incumbents profits to create profit for newcomer

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Business Model Disruption - Definition

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Questions

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Question

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Answer

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Question

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Answer

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Question

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Answer

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Thank you!
Approved Learning Partner in Egypt and Middle East