Articles - Finance & Financial Management - Strategy & Governance

Creating Value through Strategic Financial Management

Even experienced executives need guidance to increase the value of their firms. Following a successful career as an Investment Banker, Professor Patrick Legland is now Director of the HEC Paris Creating value through strategic financial management program, which aims to equip company leaders with a value adding toolbox. 

 

WHAT DOES IT MEAN TO CREATE VALUE?

“To create value, executives may need to change their point of view and company culture. There is often confusion over what can create value. A key factor to bear in mind is that value is created when a firm generates a higher return on investment than the initial cost of financing. More precisely, value can be created for the shareholders and the firm, within the framework of merger and acquisitions, and within the framework of investment projects.”

When value is created it benefits employees, improves the image of the firm, and enhances how it is perceived by the financial community and investors. You will see the return on equity being higher than the initial expenditure, returns to shareholders go up, and so do share prices. The greater the difference between return and cost of equity, the higher company valuation. 

 

HOW CAN YOU CREATE VALUE? 

To make sure a firm can create value, everybody has to be speaking the same language. All stakeholders need to have shared values and the right KPI’s in place to monitor the success of current operational management policies to add value.

Successful managers and company executives need to have a toolbox to help them create value. They often have a vague concept of how to add value to their firm, but to be effective they need to have a clear and concrete understanding of how this can be achieved. It is also important that company leaders focus on ethical concerns and treat employees with consideration to ensure that everyone in the firm works together to achieve success.”

 

Value creation relies on successful management – not just from a financial perspective but also from human resources one. Working as a team is key.”

 

 

Insights from Patrick Legland, Affiliate Professor of Finance at HEC Paris and Director of the Creating value through strategic financial management program. 

 

Patrick Legland

Affiliate Professor, HEC Paris