Enhancement of Management System

We will assist in maximizing corporate value through various approaches to enhance management system.

The market and industrial structure are undergoing major changes due to globalization, the declining birthrate and aging population. New technologies are bringing a paradigm shift to the business world at an unprecedented speed. The changes in governance in recent years have been accompanied by a gradual increase in shareholder activism, making it increasingly difficult for corporate management. In order to achieve further growth by turning the wave of disruptive changes into opportunity of creating new value, companies need to enhance their management even more than ever before in order to achieve further growth.

PwC supports our clients in maximizing their corporate value through various approaches, including providing useful information and analysis support to help CxO’s issue solving, formulate management strategies, optimize their business portfolios, restructure their businesses, and improve governance through the use of PwC’s professional capabilities.

Enhancement for strategy

The development of business strategies is not the goal; it must be implemented to increase corporate value. As changes in the business environment have become more rapid and discontinuous, the formulation of strategies has become more difficult than ever. In order to respond quickly to changes in the business environment, we support the formulation of strategies effectively by utilizing M&A.

Support for formulation of management strategy

PwC supports the construct of corporate strategies, including the establishment of corporate vision, the formulation of mid-term management plans, and the optimization of business portfolio. We will support enhancement of corporate value through using M&A effectively.

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Support for development of business strategy

PwC verifies competitive advantages by clarifying the KSF (Key Success Factor) of the business. PwC clarifies the gap between the goals set and the current condition, and supports the planning solutions to achieve goals.

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Support for CxO Agenda

PwC supports the response of CxO’s business challenges through our expertise in strategy, finance, and operations. CEOs, CFOs, and COOs are sometimes put in a lonely situation. As a CxO’s discussion partner, PwC organizes a CxO support team consisting of various professionals, and provides information and analysis contributing to management decision-making from a third-party perspective.

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Strengthening management operational capability

Strategies alone do not improve corporate value. The key to increase corporate value lies in the ability to execute management operations that steadily implement strategies. We support the acquisition of management operations capabilities to enhance corporate value by making effective use of M&A based on judgments on the pros and cons of using M&A.

Support for building management infrastructure

We support for building a system to accurately measure changes in corporate value brought by the implementation of corporate value and management strategy/business strategy from various perspectives. The results of these measurements are used in the decision-making process for M&A, as well as the enhancement of corporate value.

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Active support for structural reform

It is not only when a company's business performance deteriorates that companies need structural reform. Rather, it is indispensable to take the next step towards further growth in times of strong performance. Management resources are needed to enhance corporate value. It is also indispensable to continue to improve our corporate value. It is important to make active use of management resources, promote structural reforms, and bring the enhanced company's corporate value to the next generation. Sometimes structural reforms require making choices. We support structural reforms that utilize M&A, such as creation of management resources through carve-outs.

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Portfolio management and business restructuring

As there is a growing demand from both domestic and foreign investors to improve the return on their investments, enhancing corporate governance over individual businesses and/or group entities and also accelerating business turnover in pursuit of growth are essential. Moreover, the magnitude of uncertainty and the pace of change in the future, which are not currently visible, are doubtless increasing, leading to increased complexity in corporate management.

In such a business environment, it is essential for top management to hold multiple scenarios in view using a medium- to long-term perspective, with a clear understanding of the company's vision, such that they can prioritize investments in each business/group entity and make the right management decisions.

PwC assists clients in resolving their challenges by objectively evaluating target businesses and companies based on aspects of “Business”, “Group”, and “Time horizon”, according to the specific circumstances of each company, and by drafting potential directions and specific measures that can be taken.

Sophisticated business portfolio management

While the domestic market is maturing, the complexity of management strategies is increasing, including in terms of technological innovation, entry of emerging-country companies, and materialization of now highly challenging global strategies. In such an environment, whether or not you can steadily promote the renewal of your business portfolio, by evaluating each business horizontally and prioritizing investment opportunities simultaneously, greatly influences company competitiveness.

By objectively evaluating your businesses horizontally and clarifying the positioning of each business and the overall direction of your business portfolio, PwC provides support in designing specific directions for your troubled businesses.

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  • Evaluation of your business portfolio and development of investment plans when establishing company-wide strategies, such as medium-term plans
  • Prioritization of the potential investments of each business unit, which has multiple new business opportunities
  • Strengthening corporate governance over your businesses

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Sophisticated group company management

Many companies have established multiple group subsidiaries for various purposes, such as efficiency improvements and the promotion of new businesses. On the other hand, there exist many group subsidiaries whose asset efficiency has declined due to business development and personnel policies that differ from their original purposes. There also exist some companies that have accumulated unique know-how but are unable to utilize their strengths successfully.

PwC objectively evaluates each group company's role from the perspective of portfolio management, clarifies the positioning and direction of each group company, and supports the development of specific measures in accordance with the directions of growth and efficiency-improvement strategies.

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  • Evaluation of group entities when developing medium-term plans
  • Planning of measures to improve the group's asset and capital efficiency
  • Consolidation / reduction of group companies

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Scenario planning and business restructuring

The performance of a company depends on its own strategies and tactics, but it is also influenced by the external environment to the same degree or more. In recent years, uncertainty in the external environment has increased, as has the pace of change.

For example, many businesses are exposed to risks from unclear yet significant changes, such as intensified future competition in those industries where technological innovation and the entry of emerging-country companies are anticipated, endgames in mature industries, and the collapse of the existing order in industries that have been suddenly eroded by disruptors from other industries. Currently, the competitiveness of a company can be maintained only by its proper preparation of a business restructuring strategy that assumes multiple scenarios in advance, helping to avoid negative paths in each scenario and seeking out the ways that lead to positive results.

In light of the specific circumstances each company faces, PwC will support them in developing and promoting each company’s own business restructuring strategy (business model remodeling, industry restructuring, etc.) by implementing scenario planning and taking other measures as appropriate.

(Illustration of use)

  • Drawing up of risk scenarios when preparing medium-term plans
  • Selection of potential investment opportunities when developing growth strategies
  • Organizing for the endgames of mature industries

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Support for group reorganization

As a corporation with many businesses and organizations that aims to achieve growth with its existing businesses or M&A, the group reorganization such as consolidation, carve-out, spin-off, spin-out and holding or regional headquarters establishing is one of the effective and efficient solutions for the business management of the Group.

Under the leadership of a professional teams for the group reorganization support, we assign specialists in each operations or utilize a global network to cover a wide range of issues to be solved and provide consistent support from planning to implementation.

Support for management reforms (governance / management accounting / on-site reform)

Amid increasingly complex and uncertain business environments, which are affected by globalization, the maturation of the domestic market, and changes in the industrial structure, among many other factors, management needs to take appropriate and timely improvement measures to address various management issues.

PwC provides highly effective support for management reforms to deal with all aspects of potential management issues, including hands-on support by stationed PwC professionals with various fields of expertise, temporary staffing of support personnel and the use of the overseas PwC network.

Understanding the actual status of businesses and subsidiaries, including those overseas, identifying management issues

As a basis for appropriate improvement measures, it is necessary to understand the actual situation and management issues at a multifaceted and deep level. In addition, it is necessary to determine the directions of improvement based on identified management issues.

PwC has a wealth of experience in understanding the actual situations of companies, identifying management issues and formulating a framework for improvement. This makes it possible for us to provide support tailored to each client's specific circumstances and needs.

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Formulating an improvement strategy

In order to formulate highly feasible improvement measures, it is necessary to foster a common awareness among internal and external stakeholders – but this is not an easy task to realize without assistance. It is also necessary to firmly materialize improvement measures, including the preparation of action plans, establishment of the financial impacts of improvement and verification of feasibility.

PwC has a wealth of experience and know-how in formulating improvement measures, including in projects requiring the fostering of a common understanding among stakeholders.

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Support for the implementation of improvement measures

As a basis for the proper implementation of improvement measures, it is necessary to upgrade your business management approach so that you can grasp the actual state of the business in a timely manner and deal with all changes without exception. In addition to establishing a management system for the implementation of improvement measures, you must also conduct appropriate follow-up for on-site activities, confirm actual progress and consider alternative back-up measures to ensure the establishment of the management system for the implementation of improvement measures.

PwC has been involved in a large number of projects relating to sophisticated business management, the construction of a management system to implement improvement measures and the provision of implementation support which enables us to provide services tailored to the individual circumstances and needs of each client.

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Typical consultation cases

  • We want to inject new momentum into management when handing the business on to the next generation. We need to improve the management structure, organization, human resources and corporate culture. [Electronic equipment]
  • Changes in the global business environment (e.g., drastic changes in technology, regulations, resource prices, foreign exchange rates, wages) led to the deterioration of our business performance. Reform is necessary for survival, but we cannot do it all by ourselves. [Automotive parts]
  • Management control over our overseas subsidiaries is too weak and therefore we don’t know what is happening. We would like to strengthen our management control system, but our head office does not have the human resources to deal effectively with this issue. [Construction]
  • Due to fraudulent accounting discovered at the subsidiary, we recognized significant impairment losses. In order to prevent a recurrence, we want to strengthen corporate governance and business management with the help of outside experts. [Specialized trading company]
  • As the business environment changes, the roles required of our group companies have also changed. We would like to reorganize our subsidiaries in Japan and overseas to ensure they are in line with our future business strategy. [Software]
  • After a series of restructuring measures, our business performance has stabilized. We would like to take action to promote future growth, including the development of new businesses and overseas expansion. [Precision equipment]

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Comprehensive support for working capital improvement and cash management

Low-interest rates continue to be an issue globally and uncertainty surrounding the world economy is growing. Some global corporations exposed to foreign currency risks and turbulent emerging markets have prioritized improving their financial position. On the other hand, the market continues to require growth strategies and higher returns on shareholders’ equity. In such circumstances, it is increasingly critical for the management of globally operating companies to maintain working capital at a proper level to ensure they have self-funding options and to manage the generated cash efficiently.

For survival and constant growth, transformation in fund-raising methods and financing activities is unavoidable. For many companies, an increasingly critical part of the management agenda is analyzing and optimizing working capital and managing the available cash using sophisticated methodologies.

Working capital improvement support (Working Capital Management)

The fundamental principles of working capital are clear: reduce inventory and receivables while increasing payables balances. However, many companies find it hard to optimize working capital. Our specialists provide clients with dedicated expert resources to help drive cross-functional process improvement.

Specifically, the PwC team delivers consistent support for a project through opportunity scoping, action planning, rolling out, and monitoring. For global projects, we approach various issues in cooperation with fellow professionals from the PwC global network.

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Comprehensive support for cash management

We supplement cash management, working capital management, and various management supporting methodologies with our change management skills and expertise to ensure that improvements are sustainable.

PwC forms an optimum team with a wide range of specialists tailored to specific projects, and provides comprehensive support for cash and cash-related issues and challenges.

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Typical project cases for Japanese companies

  • Aim to improve management quality and operational efficiency and then achieve financial efficiency.
    • Due to the unique circumstances of each country, it is often not easy to completely comprehend the situations with overseas subsidiaries and, in many cases, governance risks are identified. In such cases, we analyze the current situation and simultaneously undertake the working capital optimization project.
    • We often find more opportunities for improvement in subsidiaries located in South America, southern Europe, and Southeast Asia.
  • Target synergies with newly acquired overseas operations through M&A
    • Due to the unique business practices and taxation systems of each country, it is very difficult for headquarters in Japan to lead integration programs efficiently. In such cases, the support of external professionals is essential.
    • In order to generate synergies quickly, WCM is often included in a "100-Day Plan" and implemented with the support of an external entity.
  • Target improvements in financial indices, such as ROE and ROA, by improving working capital.
    • In some cases, at the request of shareholders, WCM projects are employed to improve financial indices prior to large-scale fund-raising.

 

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M&A and turnaround support using data analytics

Recent advanced analytics technologies provide opportunities for a wide range of organizations to improve their competitiveness through the use of big data from both inside and outside the company. PwC supports the performance improvement of corporates and PE funds in M&A, turnaround or restructuring situations by leveraging data analytics.

Advanced data analytics capabilities are enablers in achieving the following: (1) enhancement of subsidiaries / operations governance; (2) high-resolution business analysis and a shift to data-driven management; and, (3) business model and operational restructurings.

Improvements in the transparency of subsidiaries / operations

An increasing number of companies are complaining that they do not really understand what is happening at their underperforming overseas subsidiaries or how to address their problems, despite the fact that they have sent in top-class talent.

Under such circumstances, PwC provides support to improve governance based on advanced performance monitoring, using data analytics. With the evolution of analytics technologies, it has become possible to improve business visibilities significantly, including timely KPI monitoring of the detailed on-site situation, which used to be technically difficult with legacy systems.

There are key changes in this field: (1) root cause analysis enabled by easy drill-down analysis; (2) new dimension analysis, which used to be unavailable due to functional restrictions of systems; and, (3) integration of internal and external data. Together, these improvements are resulting in much deeper insights into the business’s situations.

The accessibility of granularity to the level of a single payment slip could reveal cases of fraud by employees, especially in overseas operations, which means that the data analytics infrastructure can serve as a very powerful governance tool.

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High-resolution business analysis and a shift to data-driven management

After the closing of acquisition deals, we often hear from clients, who are responsible for PMI, that quite a few issues were revealed that were unidentified at the pre-deal phase due to limited time and data availability. Consequently, they are struggling to realize the expected synergies.

PwC will provide precise business analysis using data analytics after the deal when information is fully accessible or during the phase in which the turnaround plan is being prepared.

Detailed analytics enable businesses to identify specific issues by analyzing at the transactional level of data, which was previously invisible in summarized management reports. Higher visibilities provide more precise business understandings, allowing PMI plans that were prepared based on a due diligence carried out with limited information to be course corrected.

In addition, having an easily accessible single data source can prompt constructive dialogue between management and shop floor staff, which helps in the formulation of highly effective and actionable measures for performance improvement and, eventually, in achieving data-driven management.

It is highly recommended to utilize the momentum of ‘change’, driven by events such as an acquisition or the inevitable reforms involved in recovering from a corporate scandal.

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Business model transformation and operational restructurings

Currently, “Digital Champion” companies are vigorously investing to enhance their data analytics capabilities, regardless of their industry. Capability gaps between those advanced companies and “Digital Novice” companies are not obvious in contrast to the gap in their differentiation strategies. Therefore, even current leader companies could lose their position and find themselves in a situation where they say "we don't know what is causing this, but we are gradually on the decline."

In light of the fact that even Digital Champion companies are still trying to find out the best way to utilize their data analytics capabilities, the next few years could prove to be an ideal timing to change the competitive landscape drastically, as they represent a transition period that will see the emergence of new business models and ways of management.

The key to success lies in focusing on the most important capabilities that determine the competitiveness of your own business, rather than being diverted by technology buzzwords that are emerging one after another.

PwC has many professionals who are familiar with strategies to reverse the competitive disadvantage, as well as experts in data analytics to support your entire business model and operational transformation, while also leveraging the most advanced data analytics solutions.

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Our Team

Shinsuke Suzuki

Partner, PwC Advisory LLC

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Taizo Iwashima

Partner, PwC Advisory LLC

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Yoshinori Aoki

Partner, PwC Advisory LLC

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Yuichiro Nishikawa

Partner, PwC Advisory LLC

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Katsunobu Matsuda

Partner, PwC Advisory LLC

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Naohiro Oya

Director, PwC Advisory LLC

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