BENEFITS OF ADOPTING SVA

To create value, management must have an understanding of the variables that drive the value of the business. An organisation cannot act directly on value. It has to act on factors it can influence, such as client satisfaction, cost, capital expenditures, the debt / equity mix and so forth. Through an understanding of these drivers of value, management is able to establish a consistent dialogue, both internally and with the Shareholder, regarding what needs to be accomplished to create value. The benefits of moving towards SVA include:

‘1. Overall, value-based performance measures will result in greater accountability for the investment of new capital, as well as for the use of existing investments.

2. Organisation will have the opportunity to apply a meaningful private sector benchmark to evaluate performance.

3. Managers will be provided with an improved focus on maximizing shareholder value.