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SECURING SHAREHOLDER VALUE GROWTH

Cramo has chosen the shareholder value model as the framework for a practical analysis of its risk appetite. This analysis is one of the tools used in Cramo’s strategy work.

CRAMO’S FRAMEWORK: SHAREHOLDER VALUE MODEL AND VALUE DRIVERS

Some examples of Cramo’s risk appetite analysis concerning sales growth, operating margin and competitive advantage:

SALES GROWTH

Risk Component/
Driver

Outcome
if risk realised

 

Mitigation of risk/
Risk appetite

 

Link to strategy


Organic Growth

         
  • Poor allocation or bad timing of investments
  • Focus on wrong customer segments and markets
  • Ineffective sales management and pricing
  • Failure to develop new services and concepts
  • Fleet overcapacity and price erosion

  • Poor sales performance, leading to low profitability


 

  • Continuous investment evaluation process

  • Sales Performance Management and dynamic pricing

  • Monitoring of markets, customers and  competitors

  • Continuous development of new offering based on market demand

     


 

  • FINANCIAL TARGET:
    SALES GROWTH FASTER THAN THE MARKET

  • CRAMO PERFORMANCE MANAGEMENT

  • DYNAMIC PRICING

  • MODULAR SPACE GROWTH STRATEGY


Inorganic Growth

         
  • Loss­ of key customers or key management

  • Too high a valuation or bad timing of acquisition

  • Failure in integration

  • Value-destructive acquisition


 

  • Business case prepared conservatively based on Group financial targets
  • Utilise experienced employees in acquisition
  • Secure commitment of key employees
  • Establish integration project with assigned responsibilities


 

  • STRATEGIC INITIATIVE TO SUPPORT GROWTH THROUGH ACQUISITIONS

 

OPERATING MARGIN (EBITDA)

Risk Component/
Driver

Outcome
if risk realised

 

Mitigation of risk/
Risk appetite

 

Link to strategy

  • Failure to materialise cost effectiveness

  • Inefficient management model

  • Inefficient business model

  • Low profitability below target


 

  • Performance Management Model, ­i.e. strict management by objectives on all organisation levels linked to Group financial targets
  • Balance of indirect and direct costs to increase financial flexibility


 

  • FINANCIAL TARGET: EBITA MARGIN >15% OF SALES OVER A BUSINESS CYCLE
  • CRAMO PERFORMANCE MANAGEMENT

 

COMPETITIVE ADVANTAGE

Component/
Driver

Actions to drive component/ driver to mitigate risk

 

Mitigation of risk/
Risk appetite

 

Link to strategy


Differentiation

         
  • Customer and employee satisfaction
  • Strong corporate culture
  • Employee and competence retention
  • No loyalty among customers

  • Inefficient organisation

  • Loss of market share and price erosion


 

  • Implement the Cramo Story in order to build corporate culture to have loyal customers and strong corporate culture
  • Focus on career development and training


 

  • CRAMO STORY


cost leadership

         
  • Efficiency of organisation and business model
  • Profitability below targets, leading to growth below targets and loss of market share to more efficient competitors


 

  • Implement the Cramo Performance Management Model

  • Utilise Group bargaining power for sourcing


 

  • CRAMO PERFORMANCE MANAGEMENT