Business decisions have traditionally been classified according to their resulting impact. Classification based upon the length of time impacted by the decision includes, strategic, tactical and operational. Classification based upon functional area impacted is typically either financial or operational. Finally, decisions classified by financial magnitude are based upon management approval level. Decision making responsibility can be either individual or collaborative.
Significant qualitative business decision drivers include the decision maker’s risk tolerance and
past experience. In reaching many business decisions most companies utilize widely
accepted financial formulas based on certain required information. Examples of these
financial formulas include return on investment, net present value and payback period.
Decision criteria are typically utilized based upon widely utilized financial information
sources. Other business decisions may be based on the estimated likelihood of a
future outcome expressed as a probability. For example, when the spot price of a
raw material commodity exceeds or falls below a certain range, an option contract is
purchased to buy or sell the item at an agreed upon price in the future.
Changes in your company’s business environment
In today’s highly competitive advanced manufacturing product markets, it is critical to
recognize the financial information that really impacts the results of your decisions.
Changes in your industry, market and regulatory environment can significantly impact
the financial information on which your business decisions are based.
While obvious that many business decisions such as production levels and purchase
quantities are interdependent, relationships between some business decisions can be
less obvious. For instance, a decision to discontinue producing a low margin product
may cause the customers who purchased it to switch their business to a competitor resulting in unexpected lost sales of much higher margin products.
How we can help
We assist you to identify the financial information
essential to your management’s key business decisions. We start by
inventorying your business decisions and related financial data, followed by SWOT analysis and
meetings between managers whose decisions are likely to impact each other
to identify internal and external events that
impact their key decisions. We then work with you to develop a final list of the financial information to provide each manager related to the decisions for which the manager is responsible.