Principles of proper planning

from Wikipedia, the free encyclopedia

The principles of proper planning ( GoP for short ) are guidelines of the Federal Association of German Management Consultants (BDU), which requirements a well-founded corporate planning must meet.

General

In addition to a fundamental business need for corporate planning, there are also direct and indirect legal obligations in this regard.

The GoP is intended to define the essential requirements for corporate planning. The framework thus created makes planning a safe and reproducible process with feedback loops. Each individual corporate planning is preceded by an analysis that depicts both the current situation and shows future potential.

Content

The GoP contains, among other things, information on the legal basis, on the analysis, target and strategy definitions, on strategic planning , on operational planning as well as on revolving and monitoring. The starting point for future-related planning in accordance with GoP is the forecast of future developments and changes in the company and its environment (e.g. competitors and customers). The business plan sets out among other things

for the plan periods. The strategy is the basis of operational planning. According to the GoP, this must transparently link success , balance sheet and cash flow planning using an integrated planning model . The GoP recommends deriving partial plans (e.g. personnel plan , investment plan ).

An important GoP requirement for planning is to create transparency with regard to planning security. Risks are understood as possible deviations from the plan, which includes opportunities (possible positive deviations, “upside risk”) and dangers (possible negative deviations, “downside risk”). The GoP take account of this close link between planning and risk by requiring transparency about those risks that can trigger deviations from the plan. Risks, such as uncertain planning assumptions, are to be identified and described quantitatively. This is possible, for example, by specifying (a) the minimum value, (b) the most likely value and (c) the maximum value of a plan size or plan assumption, which implicitly also includes the expected value. With a "triangular distribution" that is often assumed, this is the average of the three values ​​mentioned. By specifying such “bandwidths”, false inaccuracies are avoided.

Only by taking into account opportunities and dangers (risks) is it possible to obtain actual, meaningful and decision-relevant plan values ​​in the sense of expected values . Another requirement of the GoP is to determine preferably plan values ​​that are correct “on average”, ie where possible positive and negative plan deviations are adequately taken into account. Only plan values ​​calculated in this way can be the basis for business decisions (for example investment decisions) - but not, for example, “most likely values” (mode), as they are still often seen in planning today.

The transparency of the planning security is also a necessary prerequisite for value-oriented corporate management , because, as is well known, planning security (the aggregated total scope of risk) is the basis for determining risk measures consistent with planning (standard deviation of cash flows or value at risk), which in turn determines the risk-based cost of capital (risk-based requirements to the expected return).

Financing planning is an essential part of operational corporate planning, and the company's capital requirements to be financed must be derived in a well-founded manner, for example under explicit assumptions regarding debtor deadlines, credit deadlines and inventory range, investments, etc. The link between risk management and planning that is initiated by the GoP, creates the prerequisite for deriving risk-appropriate financing structures, recognizing a threat to the future rating in good time and weighing up the expected returns and risks in the context of value-oriented corporate management when making important decisions.

With the capital market-oriented control systems still predominant today (e.g. Economic Value Added concepts, EVA) based on the Capital Asset Pricing Model (CAPM) for determining the cost of capital , planning consistency is not guaranteed if - instead of planning data - historical stock returns are considered. Corporate planning in accordance with the GoP ensures that transparency is created about the future risks that are relevant to the assessment. This creates the prerequisites for the cost of capital rates (discount rates) to be derived from the (aggregated) future risks relevant to decision-making within the framework of value-based management. The detour via capital market data, which is not available for many companies, is no longer necessary: ​​Increasing possible deviations from planning or the need for equity capital imply higher cost of capital, i.e. higher requirements for a risk-adjusted return (see calculation of cost of capital).

Analogous to the IDW auditing standard 340 based on the Control and Transparency Act (KonTraG) , the GoP require the determination of the aggregated overall risk scope, as this is the only way to assess the scope of possible deviations from the plan (planning security), the risk-based equity requirement and the threat to the company's continued existence.

Linking planning with risk information even enables so-called “stochastic” rating forecasts to be created, which indicate a development corridor (a range) of future rating development and can thus sensitize in a special way to a possible future threat to the credit rating and thus to the company.

The future (credit) rating of a company depends on the company's planning and the risks that can trigger deviations from the plan. However, there is a mutual dependency between corporate planning and rating, which the GoP requires. On the one hand, it is necessary for sustainable corporate planning that its consequences for the future development of key financial indicators (such as the equity ratio or return on total capital) lead to a rating that meets the relevant minimum requirements of the credit institutions. Corporate planning must therefore also be viable from the point of view of the creditors, which must be taken into account when preparing the planning (“ rating forecast ”). In addition, an important factor in corporate planning - the interest rate on debt capital - is directly dependent on the rating and the estimated probability of the company's insolvency. In order to be able to assess the future borrowing rate and thus the interest expense in a well-founded manner, the consequences of corporate planning (or planning scenarios) for the key financial indicators that determine the future credit rating must be estimated.

Legal meaning

Similar to the recommendations of other professional and business associations or the DIN standards, the GoP is primarily a "private set of rules with the character of a recommendation". They are therefore not binding, but in the event of legal disputes they can be a yardstick for proper action - in the sense of a recognized rule of the profession.

Web links

Individual evidence

  1. ↑ cf. on this inter alia Section 90 (1) No. 1 AktG, Section 289 ( 1), Section 2 (2) HGB, Section 18 KWG, Section 90 , Section 92 BetrVG or Section 49 (3) GmbHG
  2. ↑ Cf. Gleißner, W./Romeike, F. (2012): Good question: What are the "Principles of Proper Planning (GoP)" ?, in: Risk, Compliance & Audit, 1/2012, pp. 14-16 ( PDF; 122 kB) and Gleißner, W./Presber, R. (2010): The principles of proper planning - GOP 2.1 of the BDU: Benefits for business management, in: Controller Magazin, 6/2010, pp. 82–86. (PDF; 828 kB)
  3. ↑ See for example Gleißner, W. (2011): Fundamentals of Risk Management in Companies, 2nd Edition, Verlag Vahlen, Munich 2011 and Gleißner, W./Wolfrum, M. (2008): Equity costs and the valuation of unlisted companies: Relevance of Degree of diversification and risk measure, in: Finanzbetrieb, 9/2008, pp. 602–614 (PDF; 503 kB) as well as Romeike, F. / Hager, P. (2009): Success factor risk management 2.0: Lessons learned, methods, checklists and implementation , Gabler Verlag, Wiesbaden 2009.
  4. ↑ For more information on the crisis early warning function, see Gleißner, W. / Bemmann, M. (2008): Rating Evidence and Risk Simulation in Structural Models, in: Risk Manager, 17/2008 of August 20, 2008, pp. 6–12. (PDF; 2.2 MB)
  5. ↑ For the existing circular dependency iterative solution strategies or approximate solutions can be used.
  6. ↑ BGH, judgment of June 14, 2007, Az .: VII ZR 45/06, NJW 2007, 2983, RdNr. 37 mw