shape and share

ENSURING 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. A well-defined risk appetite enables a company to drive business at the desired level of risk.

CRAMO’S FRAMEWORK: SHAREHOLDER VALUE MODEL AND VALUE DRIVERS

Source: Risk Appetite and Tolerance Guidance Paper. The Institute of Risk Management (IRM), 2011

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

Sales growth

Risk component/ Driver Outcome if risks realised mitigration 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 pricing
  • Monitoring of markets, customers and competitors
  • Continuous development of new offering based on market demand

 

  • Financial targets
  • Cramo Performance Management
  • 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

 

  • support 
    growth 
    through 
    acquisitions

 

OPERATING MARGIN (EBITDA)

Risk component/ Driver Outcome if risks realised mitigration 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 targets
  • Cramo Performance Management

 

COMPETITIVE ADVANTAGE

component/ Driver Outcome if risks realised mitigation of risk/
risk appetite
link to strategy

Differentiation

  • Customer and employee satisfaction
  • Strong corporate culture
  • Employee and competence retention
  • Sustainability integrated into business strategy and decision making

 

  • No loyalty among customers
  • Inefficient organisation
  • Loss of market share and price erosion
  • Loss of reputation and position as an attractive investment and employer as well as loss of business
  • Reduced resource efficiency

 

  • Implement the Cramo Story in order to build corporate culture to have loyal customers and strong corporate culture
  • Focus on career development and training
  • Continuous implementation and development of Cramo Care strategy and its sustainability focus areas

 

  • Cramo Story
  • Sustainability integrated INto business 
    strategy 
    through 
    Cramo Care

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