A new series of research reports from the American Institute of CPAs and the Chartered Institute of Management Accountants examine the various weak links in a company’s value chain and what business leaders can do about them.
Those weak links include improperly mitigating risk when expanding to emerging markets, lacking an accurate understanding of the impact of natural capital and failing to create the proper ethical culture. The new research reports, entitled
By focusing on the value chain, which encompasses the environment outside the traditional boundaries of a business, and by considering the potential impacts from globalization, digitization and demographic shifts, companies can gain actionable insights into the interdependencies that create value.
The reports highlight the ways in which business leaders must evaluate opportunities—including those in emerging markets by looking at both the commercial upside and the risks inherent in less tested business arrangements.
“Today’s fast-paced environment demands that business leaders act quickly to capitalize on the opportunities available to them, including potential partnerships. However, they cannot take an out of sight, out of mind’ approach to managing the dependencies created by their extended value chains,” said AICPA senior vice president of management accounting and global markets Arleen Thomas. “Rather, the more far-reaching the value chain is, the more important performing the necessary oversight becomes.”
The reports include steps business leaders can take to change how they manage their extended value chains, such as scrutinizing performance and risk and making sure governance structures within the organizations include the appropriate skills to scrutinize performance and strategy and be alert to risks. Business leaders should also widen the focus from traditional supply chain analysis to include customer demand to the same extent, the reports recommend. Not only the distributor and the retailer need to be included in the analysis, but also those who comment on a product, service or business.
Business leaders should also learn to embrace dependency and be able to relinquish a degree of independence in favor of shared goals when forming business alliances, according to the researchers. They suggest executives should review data flows and implement efficient, reliable information exchange throughout the extended value chain. Cloud-based systems can provide a common platform across geographic boundaries.
Business leaders should be able to collect, analyze and communicate future-looking information about business activity and the external environment, the reports recommend. They should also recognize the external context and understand the regulatory, social system and infrastructure requirements necessary to support operations across the value chain.
The reports also recommend business leaders such as CGMAs align key performance indicators and articulate what criteria will be used to define “value” and develop collaborative business partnerships to gain competitive advantage across the entire value chain, while ensuring alignment between the supply chain, the business and corporate strategy.
“CGMAs have the ability to evaluate the opportunities presented by business relationships, while tracking performance and monitoring risks to help ensure the value chain is managed effectively,” added Thomas.
The series of reports includes: The Extended Value Chain;
All of the reports, along with tools and videos, are available to CGMAs at
