Could the value that is created from certain events or decisions be measured, just like other metrics? In an article published by The Global Treasurer, using the holy grail as the metaphor, practicing corporate treasurer Ben Walters points to the huge potential benefits he sees if this could be done.
Weighs in starting point and risk exposure
While other metrics such as improving profits, revenue and cash flows are indicators of value creation, they are not the same. To isolate the created value, one must weigh in circumstances such as the risk undertaken in the process, the use of capital – and a benchmark against how much should be expected from the firm given its strategic position.
As any measure of success it could theoretically be put to use in a forward-looking way – that is for budgeting – as well as in looking backward to assess management performance.
”The prize is huge”
About the outlook to measuring value directly, the writer argues that “the barriers to getting there however rest in the difficulty of determining the key inputs of value; that of risk and future cash flows. The prize is huge though, with the potential to align the entire firm behind a value creative framework.”
”This I believe could be truly transformative for the role of finance within business and treasurers, as the champions of value, can lead the way in introducing this into the mainstream.”