[MUSIC] Hi there, good to see you again. We have just finished the discussion on strategy and the budgeting process relation. Now we apply a corporate view on the connection between strategy and budget. Before starting the discussion, let's look at the corporate level and the business level. Look at this slide here. At the corporate level, we have the policies, the strategic guidelines, and corporate development plan. We have also the definition of strategic business of the corporation. Think of General Electric for example. GE has many different business areas. Each of them, such as aviation, power, and healthcare, are at the business level. And the business units have, at the operational level, functions of marketing, sales, manufacturing, and so on. The corporate budget is related to corporate level strategic planning. So the aspects we are discussing are strategic foresight and scenario analysis, mission, vision, values, and corporate development plan, strategic policies, and guidelines. These corporate strategy aspects shape the business process. The connections are originated in the policies guidelines in the corporate development plan. At corporate level planning, some major assumptions may be defined, such as the macro economic trends, the GDP growth, the inflation, basic interest rate, the minimum attractive return, the exchange rate. We may also have demographic indicators, social indicators. The budgeting process we'll go through is related to the business and operational levels because these levels comprise most of the budgeting aspects. The corporate level budget presents an emphasis in key indicators, such as the company's earnings and cash flows. The business level budget is related to the most areas of a company, such as marketing, sales, manufacturing, controlling, and others. So to have a more complete view of the budgeting process, we'll go through the operational and business levels. What next? Well, there are many different ways to support the planning process. From the budgeting perspective, we will not discuss the strategic planning methodologies in depth. But what we would like to emphasis is the budgeting process should not start without strategic guidelines. Like many scholars used to say, a company's structure follows its strategy. So make an analogy to this saying, the budget should follow the strategy. Therefore, the planning process precedes the budgeting process. And the steps in the planning would probably have gone through the following steps, senior management engagement, organizational structure analysis, identification of accounting structure, definition of strategic guidelines, of course, communication, opportunity and feasibility analysis, execution, monitoring and controlling, senior management engagement. Let's talk about it. This is a crucial step. The company's manager mobilize efforts proportionally to the level they perceive on senior management engagement. I know, it sounds obvious. But I've personally experienced cases of when people in the company had the perception of lack of engagement from this active board. Now, talking about organizational structure analysis, as we've mentioned, the company's structures follow this strategy. If this is true, then the structure would be close to what would be recommended to be in place. Then analyzing this structure, we can assess who does what from the budget perspective? The budgeting process will eventually define responsibilities to the company's areas. Now, let's talk about identification of accounting structure. The structure of the company is a reference the accounting system. If the company accounting structure is established, the responsibilities of the areas are already defined. That means, when the budget process is in place, managers of the areas will be invited to participate in the budgeting process. Now, talking about definition of strategic guidelines, by analyzing the strategic context of the company and its business environment, senior managers define the strategic guidelines. And the guidelines serve as a reference to drive the discussion in the planning process. So, by consequence, the same process occurs in budgeting. Communication, no planning would be effective without the efficient mobilization of company's human resource. Observe that, if communication for planning flows thoroughly in the company, it's quite possible that it will be so in the budgeting process. But in contrast, if it's not that fluid, be aware that you may have some limitations in the budgeting process. And it means an additional effort may be necessary to tackle the limitations. Let's talk about opportunity and feasibility analysis. Opportunity analysis is a must-have process in planning. Also, feasibility analysis should always come close to opportunity analysis. That's because an opportunity may be also a threat. Should you have limitations to feasibility, explore it. In such a case, the awareness of potential threat will be in the radar, which is good. But be aware, if you realize the radar might not be on, the company may be at risk. Now, talking about execution, well, this step is a natural one. A planning is supposed to be put into execution. The execution of projects demand for budgeting. So the outcomes of planning will naturally go into budgeting process. From a corporate perspective, when the budgeting process is ongoing, the guidelines of planning execution are a major source of information. Now, talking about the monitoring and controlling, in the implementation phase, the company is deploying programs and projects. The budget is being put into practice in the execution phase. Well, at this point, we are already in the post phase, which comprises the analysis of results in comparison with the budget. This session was about corporate overview on budgeting. We discussed how the corporate planning provide drivers to the budgeting process. In the next session, we'll revisit the concept we discussed about the tradeoff between more planning versus more control. And then we'll briefly discuss some approaches to position the company closer to the planning or to the controlling. Thank you, follow the steps of the course. And see you soon, bye. [MUSIC]
