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Expositors:

Jim Moraga & Dean Braunsteiner


Session x:

Value Based Planning

Agenda
1. Statistics
2. Planning in the Mining
Sector

4. Driving Value in
Operations
5. Putting it all together

3. Value Based Planning

PwC Mining Conference


2015 Americas' School of Mines

May
Slide 2

1.
Statistics

PwC Mining Conference


2015 Americas' School of Mines

PwC Perspective
We often observe that management views the budgeting process as a
control mechanism to achieve a target and culturally start to think
within its boundaries.
This mindset keeps an organization focused inwards and limits the
value it can provide to manage a business which naturally is externally
focused.

PwC Mining Conference


2015 Americas' School of Mines

May
Slide 4

Business planning
Financial planning continues to be of limited value and mired with conservatism.
Extended financial planning and forecasting cycle times delay decision-making;
Financial drivers and metrics dont align with strategies;
The Finance functions ownership of planning projections adds frustration with many
planning and forecasting functions;
Dissatisfaction with financial planning echoes across the organization from executives
who cant trust the accuracy, functions which feel lack of ownership due to forced
top down budgets, front line managers who question the amount of time spent on
budget analysis.
It imperative for businesses to reassess and transform the value of the overall financial planning process.
PwC Mining Conference
2015 Americas' School of Mines

May
Slide 5

A majority of businesses surveyed agree that the


planning process doesnt align with strategies

2%

Agree that their budgeting model is well aligned with


business strategy
Feel their budgeting model is unacceptable (5%) or
poorly (31%) aligned with business strategy

36%

38%

Believe their budgeting model is


adequately aligned with business strategy

Source: APQC Dynamic Planning, Forecasting, and Performance Management: Survey Summary Report - November 2014
PwC Mining Conference
2015 Americas' School of Mines

May
Slide 6

Yet typically have high costs


High cost profile for planning, budgeting and forecasting activities are
indicative of extended cycle times, complex processes, and lack of
system capabilities.

Total cost to "perform planning/


budgeting / forecasting" per
$1,000 revenue1

Personnel cost to "perform


planning/ budgeting/
forecasting" per $1,000 revenue1

Low
Performer

Median

High
Performer

$1.45

$0.66

$0.28

All Companies

$0.68

$0.36

$0.14

Large Companies

Low
Performer

Median

High
Performer

$1.04

$0.48

$0.19

All Companies

$0.44

$0.24

$0.09

Large Companies

1) Revenue metrics based on gross revenue to accurately capture level of complexity in


the business

Source: PwC client Business Planning Assessment and APQC benchmarking data (2013)
2015 Americas' School of Mines

and numerous budget iteration and extended


cycle times
Iterations based on solely on FP&A cycles and disregards function subcycles which can add multiples versions to planning development

Number of budget versions


produced before nal approval

Cycle time in calendar days to


complete the annual budget

Low
Performer

Median

High
Performer

14

4 Large Companies

Low
Performer

Median

High
Performer

103

60

30

All Companies

145

59

30

Large Companies

All Companies

Source: PwC client Business Planning Assessment and APQC benchmarking data (2013)
2015 Americas' School of Mines

Actual examples can be staggering


Highlights from PwC Business
Planning Assessment for a
Fortune 150 client:
Dedicated hours: 251,000
Cost: $16,000,000

1. Develop
Targets

6. Submit Final
Budget

~251,000
person hours
dedicated to
the BP at an
estimated
cost of $16M

2. Create
Strategic Plan

5. Post-Target
Build Out

Standard
cycle time of
203 days
(FP&A)

3. Collect
Budget Inputs

Cycle Time (Days): 203


Budget obsolete after
January!

PwC Mining Conference


2015 Americas' School of Mines

4.
Operationalize
Budget Targets
May
Slide 9

2.
Planning and
the Mining
Sector

PwC Mining Conference


2015 Americas' School of Mines

Mining Industry Trends


The market has
lost confidence
in mining
management to
deliver results

Falling prices have


resulted in revenue
declines and operating
cash flow decreases

Declining
profitability as low
yield ore bodies
become
uneconomical
Shareholders
are
increasingly
focused on
results

Industry observers are


questioning if
Costs can be controlled.
Capital discipline will occur.
Management can deliver on
expectations.
Returns on capital employed will
improve (and when).
Mining companies are severely
restricting their activities to
conserve cash, by:
Slowing down / stopping
development projects, combined with
increase in hurdle rates
Significantly reducing capital
expenditures
Undertaking projects to drive lower
operating costs

An effective, value-based planning process can help mines operate more effectively and address
stakeholder needs
2015 Americas' School of Mines

Our Mining Clients are increasingly telling us that


they have a need for:
Forecasts that are realistic reflecting actual, achievable operational performance
Improved linkage and alignment between Operations and Finance in the planning
process
Enhanced support for decision making in Operations
Alignment across the organization from mine site through to the Corporate office
Enhanced partnership between Operations and Finance to drive more effective
decision-making
Improvements to the Budgeting / Forecasting process to establish linkages to
performance tools / Life of Mine (LoM) models
Advanced cost management in the face of escalating input and uncertain prices
Improved understanding of key cost drivers / behaviours.
Feedback mechanism to identify course corrections when results differ from plan /
forecast.
2015 Americas' School of Mines

12

Financial planning depends from the inputs from


the mine plan
Typical Timeline for Strategic Planning and LOM
Jan

Feb

Mar

Apr

May

Jun

Jul

Preparation

Aug

Sep

Formulation

Oct

Nov

Approval

Dec

Implementation

Update Geology and Drill hole Data


Update Mid-Year Resource Models
Mine Plan: Optimization, Design and
Production Scheduling

Mid-Year
Reserves and
Resources

Site wide Metal Plan


Mine Plan and Metal Plan Outputs to LOM Cost Models
Mined Tonnage (Ore, Waste)
Stockpile Tonnage
Process Tonnage, Grade, Ounces, Metallurgy
Equipment Requirements
Capital Requirement
Site Life of Mine Plan Creation
LOM Review and FineTuning
LOM Consolidation and
Finalization

2015 Americas' School of Mines

and data comes from multiple, fragmented


systems

Source: MISOM consulting Services, Mining data flow chart, http://www.misom.com/


2015 Americas' School of Mines

Key Opportunities for Mining CFOs


1. Improve / enhance Finances role in performance management to increase the quality,
consistency, accuracy, completeness, relevance and speed of management information.
2. Improve the Budgeting / Forecasting process to bring insight to the budgeting / forecasting
discussion, establish linkage to performance tools / Life of Mine (LoM) models, operational
scheduling and reporting in support of improved scenario development and analysis.
3. Improve the process / tools used to evaluate investment opportunities, including
improved use of scenario analysis and modelling.
4. Improve the partnership between Finance and Operations in order to drive faster/more
effective decision making to support improved shareholder value.
5. Support an optimized close & consolidation process by finding and capturing
improvement opportunities for process / flow of financial & operational information from mine
sites to the corporate office.
6. Build a high-performing Finance team, at the mine sites, regional offices and corporate
office; in a competitive global job market. Effectively manage an increasingly global Finance
function, with clearly aligned responsibilities at all levels.

2015 Americas' School of Mines

Key Opportunities for Mining CFOs


1. Increasing quality, consistency, accuracy, completeness, relevance and speed of
management information.
Getting information that is accurate and timely is a common issue and a priority for CFOs in Mining. Information is
clustered in various systems and even from mine to mine these systems can be different. Getting the right information
to flow without spending millions of dollars on ineffective systems can be a challenge.
Common Issues

Mining Information Management Model

Strategize
Strategic Drivers
Objective and goals
Scenario Planning
Metrics/Dimensions

Plan
Budgets
Forecasts
Models
Approvals

Consolidate
Consolidation
Inter-company
Allocations
Currency

Database
Actual & Plan Data Relational and Multi-Dimensional Structured and Unstructured
Data Transformation
Mine Site 1

Mine Site 2

Mine Site 3

Mine Site 4

Finance

Finance

Finance

Finance

Mine
Planning &
Scheduling

Geological
Database

Safety
Incident
Management

Asset
Management
System

2015 Americas' School of Mines

Mine
Planning &
Scheduling

Geological
Database

Safety
Incident
Management

Asset
Management
System

Mine
Planning &
Scheduling

Geological
Database

Safety
Incident
Management

Asset
Management
System

Information
Delivery

Analyze
Management
Statutory
Compliance
Alerts
Corrective Triggers

Management
Applications

Data Flow

Controls

Common Language and Definitions

Consistent Process

Report Tools, Query Tools, Portals, Scorecards, Dashboards and Visualization

Database

ETL
Technologies

Mine
Planning &
Scheduling

Geological
Database

Safety
Incident
Management

Asset
Management
System

Source
Data

Legacy / manual
systems at the mine
site that dont
integrate to corporate
databases
Lack of integration
between operational
and financial systems
Lack of necessary
investments to
maintain / enhance
technical
infrastructure
Poor data quality /
lack of consistent
definitions across
sites
Duplication of effort
and numerous ad-hoc
requests

Key Opportunities for Mining CFOs


2. Driving improvements in budgeting and forecasting by linking Operational and
Financial planning
In most mining companies the financial budgets and forecasts prepared at corporate are disconnected from the
LoM models and Operational plans and schedules. This creates the potential for inaccurate forecasts and market
guidance that does not reflect operational realities.

Process needs to be integrated to


allow changes in operational schedules
and plans to be updated in financial
forecasts. This is where the
current process breaks down in
most mining organizations.

2015 Americas' School of Mines

Example: As an outcome of performing a


variance analysis, Finance has identified that
diesel fuel expenditure is tracking over
budget. If an integrated process is in place, it
can be easily determined whether this is a
one-off occurrence, or a longer-term issue
that will impact future profitability. If the
later, higher fuel usage should be reflected in
the updated forecast, on both a site and
consolidated basis.

Key Opportunities for Mining CFOs


4. Working as a resource and partner with operations to drive productivity, efficiency
and cost effectiveness.
Cost analysis in most mining organizations is focused on a backward-facing view of what happened, as opposed to
identifying what actions can be taken to drive sustainable reductions in cost.

Value driver models provide mining


companies with transparency and
predictability of their cost performance,
allowing:
1. Improved understanding of the
operational levers that drive financial
performance
2. Ability to provide integrated reporting on
operational drivers and financial
outcomes
3. Identification and prioritization of cost
reduction opportunities and scenario /
sensitivity analysis on results
4. Implementation of an accountability
framework to drive financial
performance

2015 Americas' School of Mines

3.
Value based
planning and
forecasting

PwC Mining Conference


2015 Americas' School of Mines

May
Slide 19

Budgeting designed for a past age


Doubts are cast on the value of traditional budgeting:
The bane of Corporate America
A tool of Repression
An unnecessary evil
Traditional budgeting concepts and tools were designed for a different
world:
Old World Paradigm

New World Paradigm

Plan, make sell

Customer centric

Predictable

Rapid change

Domestic centric

Global

Bricks and mortar value

Intangible value

Central control

Empowered and Challenging

2015 Americas' School of Mines

20

What is Value Based Planning?


Value Based Planning
integrates strategic
and operational plans
into a dynamic
forward looking
framework that enables
managers to set
priorities and manage
performance against
stakeholder value goals

PwC Mining Conference


2015 Americas' School of Mines

TRADITIONAL

VALUE BASED

Cost

Value

Complex

Structured

Rigid

Dynamic

Unresponsive

Adaptive

Inefficient

Leveraged

Controlling

Motivating

May
Slide 21

VBP is based on emerging best practices


From

To
Setting goals

Financial plan based

Finance variances against


fixed budget
Detailed monthly, lagging
indicators
Annualised, limited
reforecast
Spreadsheets, command
and control

2015 Americas' School of Mines

Performance
measurement

Reporting &
control

Forecasting

Systems

Balance scorecards linked


to delivering strategy and
competitive advantage
Trends in key result areas.
Individual and team
performance
Leading indicators as well
as current performance
Driver based, predictive
rolling forecast
Integrated systems,
Collaborative information

22

Moving from traditional to value based budgeting


Gaming and
Negotiation

Goals

Annual Linear
Process

Annual
Budget

Performance
Targets

Actual
Performance
Comparison

Assumptions

Strategy

External
Drivers

Actions

Measure
Performance

Dynamic
Business
Planning

Performance
Scorecard

2015 Americas' School of Mines

Internal
business
model

Continual Adaptive
Process

Business
Plan

23

VBP Cycle
Strategy

External Drivers

Actions

Business
Simulation

Learning
and
Adaption

Dynamic
Business
Planning

Internal
business model

Measure
Performance

Forecasts
Performance
Scorecard

Business Plan

Rewards

2015 Americas' School of Mines

24

The Technology Dimension

An integrated VBP application that


supports a closed-loop system will
provide the advantages of a single
source of information for budgets,
forecasts, and actual results.
Using Web technology will enable
reach to remote users easily and help
keep users up-to-date. New users can
be added easily; changes can be
made to, and take immediate effect
within, a central database.

Dynamic

Anticipatory

Leveraging Software Tools

Fixed
Low

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2015 Americas' School of Mines

Collaborative

High

Slide 25

Functional dimension
Provides complete flexibility in budget layout and format
Allows for effective operating, capital budgeting and balance sheet
budgeting
Caters for any type of cost modelling for both fixed and variable
costs
Handles any type of re-allocations between cost centres, projects,
companies, etc.
Enables easy implementation of strategic rolling forecasts, with
incorporation of actual monthly and year to date information

2015 Americas' School of Mines

26

Functional dimension cont.


Addresses both top down and bottom up planning approaches and
provides synchronicity between them
Incorporates full process control and e-mail alerts to obtain
maximum efficiencies
Allows for user-definable assumptions or budget drivers that can be
made visible to users and which can be used to drive scenario
management
Facilitates automated interfacing with the organisations financial
and subsidiary systems for historical and fiscal year to date
information
Allows multiple versioning at both organisational and local user
levels
2015 Americas' School of Mines

27

4.
Driving value
in operations

PwC Mining Conference


2015 Americas' School of Mines

May
Slide 28

Closing the Value Gap in Mining


Putting strategy into action to drive value
Most mining companies today are successful in capturing and accessing data, transforming
data into business information, and making data available to users, however, they are not as
successful in directly linking information to action, and its corresponding value
Common challenges in mining include:
Strategy is not clear or disseminated
Planning is not performance driven
Lack of integration between strategy,
risk, budget, business and LOM

Lack of alignment of people,


processes and tools
Cultural barriers
Organizational biases
Value

2015 Americas' School of Mines

Data quality challenges


Too many KPIs or irrelevant measures
Lagging indicators and inability to forecast accurately
Measures not linked to decision making sphere/cascaded strategic outcome
Slide 29

Management Operating System Framework


Linking strategy to execution to drive action
Vision and business
strategy

Strategy

Key aspects of MOS

Integrated Planning Linking LOM


planning & strategic planning to the
business planning cycle and integrating
actual performance back into the planning
cycle

Performance indicators Developing


measures linked to strategy and value
creation. Cascading measures through the
organisation to support decision making at
all levels

Report and Review Consistent and


balanced reporting across the full spectrum
of strategic objectives with focus on
forward view and bias on action

Reward and Compensation Performance


culture needs to be reinforced through
performance measurement, recognition,
and accountability to drive the desired
behaviours

Basis for plan and budgets


Goal Setting
Revisions

Integrated
Planning

Reward &
Compensation

Performance
Appraisal

In Scope

2015 Americas' School of Mines

Performance
Indicators

Report
&
Review

Out of Scope

Leverage existing technology and provide for reporting of


historical and forward-looking metrics
Slide 30

Benefits of a Management Operating System


Enhanced business insight and decision support

Improved effectiveness

Assist in evaluating strategic and tactical alternatives,


and sensitivity to change in underlying assumptions

Improved forecast accuracy through use of business drivers,


performance metrics and other assumptions

Early Warning System to enable earlier identification


of emerging business issues and faster response to
rapidly changing events

Improved alignment of plans and resource allocations with


strategic objectives and priorities

Enhanced understanding of the complex interrelationships between different parts of the business,
including multi-dimensional views
Improved identification of cost or capital improvement
opportunities

Aid in setting challenging but achievable performance


targets, and reduction in gaming behaviour
Fewer iterations through tighter integration of strategy,
planning and budgeting

Increased efficiency

Developing a Performance Management Culture

Focusing on the value drivers and key metrics that drive


strategic outcomes

Motivates the right behaviours (focus on value drivers and


performance metrics rather than potentially disconnected
financial outcomes)

Integration of inputs and outputs with related strategy,


performance management and rewards processes
reduces duplication, inconsistencies and reconciliation
challenges
Shorter management reporting cycle times through
more efficient process design and use of a consistent
toolset across the enterprise

2015 Americas' School of Mines

Increased accountability and ability to tie rewards to


performance to drive behaviours
Aids in transforming support functions to a Business
Partner role
Performance management processes cascaded throughout
the organization driving accountability and control at the
right levels
Slide 31

Embedding value drivers, key risks and indicators


in the MOS is crucial for success
PLAN ( Plan, Budget & Forecast)
LOM plan, Business plan, Budget, KPI / KRI target setting
Identified risk management strategies related to the objectives

ACT
Assessment & Reward
Cycle
Identify and monitor
improvement
opportunities

Processes

Systems

Integrate performance
management in one management
decision making process to ensure
performance issues and risks are
considered when they matter most
and are acted upon in time

Adjust or implement technology to


support the new/adjusted
processes as required (e.g.: BI
software or architecture for
performance & risk information)

People

Organisation

Align corporate objectives with the


personal objectives of staff by
communicating effectively and by
translating company KPIs to align
with employees personal
performance indicators

Embed the maintenance of


performance management
processes and content in the
organisation

DO
Execute operational plan
and risk management
strategies
Explicitly consider and
account for risks during
decision making

CHECK ( Reporting & analysis)


Management Information (KPIs)
Forward-looking Reporting
Reporting on Performance Management
2015 Americas' School of Mines

Slide 32

MOS Value drivers and KPIs should link to


strategy execution and shareholder value creation
Determining value drivers
Strategy

Value drivers answer the question In what should we excel


at in order to achieve our objectives?
Value drivers can be either financial or non-financial:

Business objectives

- Financial value drivers are linked to key line items on the


financial statements (EBITDA for example)
- Non-financial value drivers are linked from value-added
capabilities to financial statements

Determining KPIs
Value drivers

Identify suitable metrics - think about the effect on human


behaviour
5 guiding principles:
1. The number of KPIs at each level should be limited

KPIs

2. The organisational structure should guide a logical break


down of KPIs
3. KPIs should consolidate upwards linking to strategy
4. KPI's must be SMART, valid, simple and controllable
5. Define ownership of KPIs

2015 Americas' School of Mines

Slide 33

A MOS performance reporting framework


cascades down to each level in your business
Various levels in an organization drive different
reporting requirements

Cascading KPIs ensure everyone is aligned and


delivering to the same goal
Focused on long-term and strategic decisions
Performance Management
Exception Reporting / Alerts
Compliance Reporting
Reporting frequency Monthly and Quarterly

Level 1
Senior
Management
Dashboards

Strategic

Focused on evaluating business execution


Functional area reporting
Trending/Interactive Analysis
Higher Level Operational KPIs/ reports
Exception Reporting/Alerts
Reporting frequency Weekly and Monthly

Level 2
Middle
Management
Dashboards

Tactical and
Functional

Level 3
Team
Management
Dashboards

Transactions
and
Operations

Focused on enabling operational & transaction


based decisions
Real-Time
Structured Reports
Transactional level KPI/reports
Reporting frequency Daily and Weekly

Level 4
Individual
Dashboards

Performance
and
Root Causes

Focused on personal development and performance


Analysis possibilities at the root cause level
Reporting frequency - On a needs basis

2015 Americas' School of Mines

Slide 34

Example: Review Process and Operations KPIs


Cascading KPI hierarchy example
3.
Determine
Causes of Major
Variances

2.
Identify
Major
Variances
Against Plan
1.
Collate and
Analyze Monthly
Results

Mining ($/t)

4.
Define
Mitigation
Projects/Action
Steps

Drilling ($/m)

Operating Costs ($/hr)

Mechanical Parts ($/hr)

Three key metrics driving


Drilling ($/m) one financial,
two operational.

Consumables ($/hr)

5.
Monitor
and Track
Progress of
Action Steps

Maintenance ($/hr)

Operating Time (hours)

Cascading metrics throughout the organization to


drive accountability and control at the right levels,
relevant to the decision making sphere.
Fact based performance interactions to drive
action/decisions and progress tracking to close out.

Three primary metrics


driving Operating
Costs ($/hr).

Drill Availability (%)

Drill Utilization (%)

Penetration Rate (m/hr)

Blasting ($/mass blasted)

2015 Americas' School of Mines

Six key cost metrics for each key


mining value chain process
beneath the total Mining ($/t ) metric.

Operational metrics
frequently drive cost
outcomes this linkage
is critical.

Mucking ($/t)

Hauling ($/t)
Mine Services ($)

Management ($)

Slide 35

Commitment of Top Management is essential for


successfully implementing a MOS project
Many organisations struggle to successfully implement a Management Operating System if
management underestimates the impact it has on its organisation, and time that is required to sustain
the cultural change.
Dos
Top - down approach
Actively involve management to create sufficient support in the
organisation
Invest sufficient time and effort in defining the strategy and
understanding what impact it has on the business
Effectively communicate the strategy within the organisation
A clear and present decision-making process (i.e., important
decisions are made by senior management)
Clearly appointed roles & responsibilities
Embedding performance management in the companys
processes (starting with the Business Planning process) and
culture
Translate the new processes into employees performance &
reward cycle
Actively manage and monitor planned actions drive
accountability

2015 Americas' School of Mines

Donts
Lacking management commitment and support
Underestimate change management required to drive
cultural change
Define strategy at corporate level and not communicating
it to the rest of the organisation
Starting with communications and change management
during the implementation phase, rather than during the
design phase of the programme
Focusing on meeting the budget instead of obtaining the
strategic objectives
Too much data, not enough insightful information
doesnt support management by exception
Incentive compensation linked to budgets which drives
sandbagging and avoidance of stretch targets and not
sufficiently linked to controllable performance
Implementing a fully equipped BI solution without
addressing underlying processes
Slide 36

Focus on consistent Business Processes to build


effective Performance Management
An Anglo American example

2015 Americas' School of Mines

Slide 37

Key attributes of a leading MOS


Leading characteristics
Focus

Alignment

People

Rigorous focus on value drivers and


value adding activities

One corporate language

Culture focused on value creation

Tight governance of MOS

Tangible results through effective and


efficient strategy execution

Balanced scorecards and KPIs cascaded


towards all levels

Management leads strategic focus &


alignment (walk the talk)

Strategy focused planning and


management

Driver based planning and control


processes at all organisational levels

Excellent performance analysis and


decision making processes

Investments in and deployment of


technology are aligned with strategy

People performance management


processes are in place and aligned with
Management Operating System, e.g.:

Efficient management meetings

Sharing of information and leading


practices between sites / divisions

- Clear compensation and incentive


processes linked to key drivers

Clear organizational structure aligned


with strategic goals

- People understand linkage between


business strategy, personal
scorecards and daily decision making

One single source of management


information

Top management as key sponsor of


performance management

by continuously focusing and aligning their


organisation
2015 Americas' School of Mines

Slide 38

5.
Putting it all together

PwC Mining Conference


2015 Americas' School of Mines

May
Slide 39

Making it Happen
Inextricably link planning and budgeting
Create and validate a prototype system
Make the most of existing IT investments
Plan for growth
Give attention to organizational issues
Allow user to choose functions

2015 Americas' School of Mines

40

What are the rewards of VBP?


Increased business flexibility
Improved planning
Better decision-making
Smarter organizations.
Unified organizations.
Stock market rewards

2015 Americas' School of Mines

41

So, we should abandon budgeting?


No, budgeting should be an integral part of our management
framework.
We should redesign our budgeting and planning framework to meet
the needs of our new business models for todays world.
The planning framework needs to adapt and evolve so that it does
not become a barrier to value creation.
Many companies do not require major overhauls to their planning
budgeting and reporting framework. They need to identify specific
elements that move them closer to VBM and provide a step change
benefit.

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42

Conclusion
Successful companies see budgeting as the cornerstone to a closed-loop
system for management planning and decision making. Such a system
drives a companys quest for competitive advantage and consists of
interlinked management processes of which budgeting is central
turning strategic initiatives into plans and budgets that deliver expected
results
An effective VBP system harnesses the best thinking and collective
knowledge of all individuals who are most intimate with the operations
of the organization.

2015 Americas' School of Mines

43

6.
Self assessment

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2015 Americas' School of Mines

May
Slide 44

A five-minute review of your Planning and


Budgeting
The budget is aligned to
strategy and sources of
competitive advantage
The budget provides a strong
motivational force and supports
cooperation and team working
The budget is congruent with
the business culture of
responsibility and empowerment
The budget is adaptive and
flexible to changing needs of the
business.
The budget is acknowledged to
be efficient, low cost and value
creating . Regular re-forecasting
is predictive based.

2015 Americas' School of Mines

The budget is a stand alone cost


allocation process remote from
the business

Budget targets are not


understood or owned by
managers.

The budget is restrictive and


acts as a barrier to innovation
and creativity.

The budget is hard wired and


inflexible.

The budget is expensive,


inefficient and disruptive to
management and the business.
Re-forecasting is demanding
and time consuming.

45

The value see-saw Value add vs Value destroyed


If you score 5 to 10:
It is likely that your budget process is destroying value
Possible issues:
Your budget design is not in line with the strategy process and corporate vision
Budget a management tools are not for enabling operational excellence and innovation
Your budget is not dynamic or responsive to key events and changes

If you score 10 to 20:


It is unlikely that your budget process is consistently adding value
Possible issues:
Budget doesnt provide stretch targets or interface with performance management
Budget doesnt encourage or reward cross-business cooperation (may inhibit cooperation)
Budget process isnt within the top quartile of best practice measures
Budget isnt supported by flexible or adaptive systems

If you score 20 to 25:


Your budget process is likely to be adding value
Possible issues:
Budget committee doesnt examine ways to enhance the budget on a regular basis
Performance measurement systems are not robust and regularly challenged
Potential opportunities exist for the budget to add further value to your businesses

2015 Americas' School of Mines

46

7.
Improving
financial
performance

PwC Mining Conference


2015 Americas' School of Mines

May
Slide 47

Mining companies are looking for ways to drive


improved Financial performance
Profitability
SG&A
Sourcing
Operational Cost
Management

Productivity
Levers to
drive
financial
performance

Planning & Scheduling


Maintenance Costs
Performance Management
Asset Utilization
Plant Operations

Capital

Working Capital
Investment Capital

2015 Americas' School of Mines

Levers
Corporate support teams and
management
Administration costs
Back office processes
Suppliers and spend
Consumables
Repair and maintenance

Examples
Align organization to leading practice on span of control
Align activities between mine sites and corporate to eliminate
duplication
Fully leverage current technology and tools
Complete spend analysis
Generate category strategies, aggregate demands, leverage supply
base, and conduct strategic negotiations
Develop strategies to reduce tire wear and explosive usage
Reduce maintenance contractor and supplier costs

Levers
Equipment planning and
scheduling
Labour planning and
scheduling
Equipment availability
Management reporting

Examples
Plan truck, hauler, shovel and drill selection and usage to achieve
profitable production
Plan crew sizes and shift patterns
Implement information based preventative and reliability
(MTBF) programs
Optimize intervals between shutdowns and overhauls
Link operational production reports and to financial outcomes
for integrated reporting
Stream line safety reporting to gather insight, prevent incidents
and achieve zero harm through shared learnings

Levers
Inventory
Payables
Projects
Project management and
control

Examples
Pool spare parts across sites through effective modeling and
inventory management
Maximize planned maintenance activities in order to minimize
required parts inventories
Work with suppliers to maximize payment terms and streamline
sourcing process
Manage project portfolio to ensure continued resource
development and production growth
Deliver the appropriate projects on time and on schedule

pwc.com/pe

2015 PricewaterhouseCoopers S. Civil de R.L. Todos los derechos reservados. En este


documento, "PwC hace referencia a PricewaterhouseCoopers S. Civil de R.L., que es una
firma miembro de PricewaterhouseCoopers International Limited, cada una de las cuales es
una entidad jurdica separada e independiente.

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