Organisational value: a risk enhanced view of financial value

Throughout this book, different aspects of organisational value have been examined. In Chapter 2, the notion of a strategy based value chain (SBVC) was introduced as represented in Figure 11.1. In Chapter 3, which examines organisational decision making, some of the significant external business environment factors upon which the internal operating environment determinants of organisational value are contingent was developed and discussed. How human resources contribute to internal organisational value and organisational adaptive capacity was discussed in Chapter 4. The influence of the supplier and customer relationships on the organisation and organisational value were discussed and examined in Chapters 5 and 6. Chapters 7, 8, and 9 provide furth er insights about supply, quality and ecological factors, both in the organisations external business environment and internal operating environment that have implications for organisational value and business and operating risk. These factors go across national and international boundaries and how they are managed, or not, can influence organisational value and risk. Chapter 10 considers the management and measurement of organisational value from a predominantly non-financial perspective. However, it also considers the need for a balanced approach, including the incorporation of risk, in managing organisational performance and value. In this chapter, how the management accountant might go about modelling organisational value is discussed and examined. It first focuses on some of the traditional and contemporary financial techniques used to value an organisation's component parts and then supplements this by the consideration of sources and types of external business and internal operating risk that an organisation might be exposed to. These traditional techniques include methods to determine return on investment (ROI), residual income (RI), EVA®, and abnormal earnings (AE). The external and internal business and operating risk implications, especially those relating to customers, suppliers, the natural environment and internal organisation flexibility/capacity are then explored in terms of the potential they provide for enhancing the determination of organisational value and management decision-information.