Plan of International Business Development for the Corporate Finance Collaboration Model's Change & Enabling Concept

Table of contents

Title Page

Preface

Table of contents

Glossary

List of figures

List of tables

1 Introduction
1.1 Embedment in the overall context
1.2 Scope of application
1.3 Definition of problems and respective goals
1.4 Structural approach of the paper

2 Literature review and theoretical background
2.1 Internationalization and other key terminology
2.2 Necessity for and modelling of Change Management
2.3 Influence of corporate and national cultures

3 Analysis and generation of insights
3.1 Environment and the origin of the project
3.2 Stakeholder and risk assessment
3.3 Internal competitive situation and customer requirements
3.4 Study of target regions

4 Strategy development and evaluation
4.1 Derivation of options
4.2 Evaluation and implementation

5 Critical review of the approach

6 Conclusion
6.1 Summary and realization of objectives
6.2 Resumé and outlook

Reference List

Appendix

Preface

The original version, which was submitted to the School of International Business and Entrepreneurship (SIBE) at Steinbeis University Berlin as well as the respective foreign, cooperating university within the framework of the dual degree program and positively evaluated in accordance with all requirements, had to be changed before publication in this version. Due to the fact that it was written in cooperation with a company, confidential information from that organization was included, which was subject to a confidentiality clause. In order to make the work accessible to the public, company and department names, employee names, operating figures, locations and other information that would have allowed conclusions to be drawn about the company were removed, anonymized or encrypted. Accordingly, the multinational German company under investigation will be referred to in the following as '(the investigated) company' and any employees interviewed will be identified with two letters instead of their respective names.

Glossary

1A@B Overall accounting process optimization project

ACC/ACR Accounting department per country / region

ACE Accounting Center of Excellence (before: CoG)

CEO Chief Executive Officer

CF Corporate Finance and Accounting department

CF/EA Executive Vice President Accounting

CIP Continuous Improvement Process

CM Change Management

CMCEC CF Collaboration Model-Change & Enabling Concept

CoG Center of Governance

C-PO Country Process Owner

DBE Deployment of Business Excellence

GmbH Type of legal entity (like LLC or Ltd.)

G-PO Global Process Owner

GSA Global Shared Service (Center) Accounting

HQ Headquarter

IoT Internet of Things

KPI Key Performance Indicator

L-PO Local Process Owner

Mio. Million

MIT Massachusetts Institute of Technology

PEX Process Experts

PMO Project Management Office

PO Process Owner

PwC PricewaterhouseCoopers AG

Q Quartile(s)

RoC Return on Change

WHU Wissenschaftliche Hochschule für Unternehmensführung – Otto Beisheim School of Management (Vallendar)

WS Workshop

List of figures

Fig. 1: Hierarchy of objectives

Fig. 2: Structural approach of the paper

Fig. 3: Three strategic pillars for internationalization

Fig. 4: Degree of goal fulfillment

Fig. 5: 1A@B Process Change Approach

Fig. 6: CMCEC project contracting

Fig. 7: Philosophy of the CF collaboration model

Fig. 8: The Uppsala internationalization model

Fig. 9: Dimensions of internationalization

Fig. 10: Lean Change Management Approach

Fig. 11: Hackett Value Grid

Fig. 12: The Company’s development 2012-2016-2022

Fig. 13: Project worthiness analysis

Fig. 14: Stakeholder Power-Interest Matrix

Fig. 15: Gross risk matrix

Fig. 16: Gross-net risk comparison

Fig. 17: Scoring model example

Fig. 18: Vizualization of demand board

Fig. 19: Customer survey summary

List of tables

Tab. 1: DESTEP analysis LIV

Tab. 2: SWOT analysis (1/2)

Tab. 3: SWOT analysis (2/2)

Tab. 4: Strategy pillars and measures

Tab. 5: Project implementation plan

1 Introduction

1.1 Embedment in the overall context

„Globalization has changed us into a company that searches the world, not just to sell or to source, but to find intellectual capital - the world's best talents and greatest ideas.“ (Welch, 2001 as quoted in The Globalist, 2001)

This quote by General Electric’s CEO Jack Welch vividly illustrates two important aspects: On one hand, how the megatrend of globalization has been influencing and is still shaping private as well as corporate life and on the other hand how this “inevitable wave of the future (…) is frequently confused with internationalization, but is in fact something totally different.” (Daly, 1999, p. 31). For this reason, it is pertinent to elaborate on this issue later on in the literature review because a shared understanding is key in order to provide correct and generalizable results by means of this paper.

For a comprehensive understanding of the underlying problems and thereof derived goals for the paper and the project, it is necessary to highlight another trend, whose origin can be traced back to aforementioned one: In addition to the increasing competitive pressure, primarily in the currently disruptively changing automotive and supply industry (Mohr, Kaas, Gao, Wee, & Möller, 2016, pp. 4-5), the trend of the so-called renaissance of accounting is having far-reaching consequences. Since about 2010, the enormous potential for improvement in the financial sector has been (re)discovered, resulting in the necessity for various analyses with an internal and external focus, in which the existing processes were examined with regards to performance and compared to competitors by benchmarking oneself (MacDonald & Richardson, 2002, p. 120).

1.2 Scope of application

An organization strongly affected by the aforementioned developments is a German multinational industry conglomerate whose name is anonymized here and below to "(the) company" for reasons of confidentiality. The firm is supplier of technologies and services for the automotive industry as well as an important player for other industry segments worldwide, particularly in IoT matters (Automobil Industrie, 2017, p. 1). Its communicated strategic goal is lorem ipsum dolor sit amet, consetetur sadipscing elitr, sed diam nonumy eirmod tempor invidunt ut labore et dolore magna aliquyam erat (The Company, 2017, p. 2; The Company, 2017a). In order to do this and always to stay one step ahead of the competition, it is inevitable to keep pace with the most important trends and strive for continuous improvement(Ionescu & Dumitru, 2015, p. 99).

However, the aforementioned benchmark study revealed that the own accounting performance was not yet in line with the targeted world-class level, but that this could be reached by exploiting the emerging trend to improve the effectiveness of the finance functions and generate the necessary synergies (Grosse & Arway, 2017, pp. 3-14, 23-27). An important milestone in the consequently initiated project for the overall accounting process optimization (1A@B) was the establishment of a central finance and accounting department (CF) by centralizing the former local accounting departments (ACC), followed by the continuous and still ongoing improvement of processes. More specifically, through their optimization, harmonization and standardization (see appendix A-I), managed by the so-called Accounting Center of Excellence (ACE), the foundation is being laid for the final phase. In this stage the main targets, better cost efficiency as well as quality, shall be achieved through the outsourcing of the revised processes to the Global Shared Service Centers (GSA), located in low-wage countries(Wolszczak-Derlacz & Partek, 2018, pp. 130-133), as well as automating these procedures in the next step with e.g. Robotic Process Automation (Karsten, 2018, p. 5).

At the same time, the service department Deployment of Business Excellence (DBE) was established, to manage the necessary changes on the path towards fulfilling the CF business strategy. The main enablers were identified to be the design and implementation of a holistic concept for sustainable change, by promoting the aspired structures while training and enabling the staff (The Company, 2017b; The Company, 2018, pp. 2, 4-5).

1.3 Definition of problems and respective goals

As to some extend anticipated, the problems arising from this large-scale organizational development were found to be unclear responsibilities and inadequate communication, leading to ineffective and inadequate provision of accounting services as well as hindering the projects progress towards reaching its overall objective. Therefore, among other things, the subproject CF Collaboration Model Change & Enabling Concept (CMCEC) was commissioned by CF/ACE8 to CF/DBE (see appendix B-I), focusing on the newly formed community of process owners, which is known to be the practical implementation of the theoretical cooperation model for CF called collaboration model (see Appendix C-I). This rather innovative organizational format was initially introduced to improve the cooperation across departments, necessary for the aforementioned transition as well as to assign new and sustainable roles to the former accountants, as so-called process owners. The framework governs the multiple responsibilities within this community, which can be described as a function-based and therefore cross-sectoral cooperation of employees whose individual responsibility is the supervision and improvement of specific accounting processes.

While the target of 1A@B has already been fully described, the aim of CMCEC specifically is therefore to enable the individual process owner, regardless of their affiliation, to work more effectively and efficiently with each other and within their community in order to translate the provided theoretical model for cooperation between the three parties into effective and measurable actions, such as progress in terms of global standardization. The figure below illustrates how the targets of the respective projects cascade down resulting in the identification of the specific issues, which are to be dealt with in the scope of this project paper(Fischer & Pfeffel, 2014, pp. 37-38). Since the outlined area of application in combination with the present phase in the project is mainly concerned with internationalization, the goal was set to implementing the aforementioned collaboration model, which was until now developed under rather national influences and piloted in Germany, into the entire, multinational organization of corporate finance at the company.

Abbildung in dieser Leseprobe nicht enthalten

Fig. 1: Hierarchy of objectives

1.4 Structural approach of the paper

In order to be able to achieve the previously outlined goals regarding a sustainable, worldwide implementation of the theoretical collaboration model and the practical PO community, a consistent approach is necessary so that comprehensible and reliable findings can be attained. This results in the present structure, that the figure below illustrates, which at first provides an introduction, already covered here, which facilitates an understanding and embedment of the problem in the overall context as well as the derivation of the objectives to be achieved. In the next chapter sufficient literature will be examined in order to portray and legitimize the general conditions framing the further progress in terms of the strategy development. However, this requires a holistic analysis beforehand, which covers both internal, organizational and external, market-side factors. With the help of the versatility of the SWOT framework, the results will then be clustered, evaluated and organized with regard to their suitability for the derivation of activities, so that in the next step, on the basis of the characteristics of these findings, different tactical design approaches can be applied, which finally result in strategic pillars out of which the overall internationalization strategy is composed. The created concept shall than be evaluated in terms of the valued that it might add to the applying organization and subsequently critically reviewed, specifically looking at possible limitations of the developed solution or shortcomings in its design process. Finally, the paper shall close by summarizing the results, checking if the initially set goals are fulfilled and what implications the new insights or discoveries will have on the further course of the project.

Abbildung in dieser Leseprobe nicht enthalten

Fig. 2: Structural approach of the paper

2 Literature review and theoretical background

2.1 Internationalization and other key terminology

In order to ensure a certain traceability of research and analysis as well as comparability of the findings, it is imperative to initially agree on a common nomenclature. As already addressed in the introduction, a clear differentiation between globalization and internationalization is necessary for the following examination (Bittner & Leimeister, 2013, pp. 112-113). Preliminarily, it can be stated that many authors have tried with rather little success to define globalization in many different ways. Some claim that it is not possible to do so, others are of the opinion doing so would limit the meaning of it, while again others have challenged these two beliefs and created a working definition. Despite different opinions on its development, all reviewed authors agree that the definition of this term is anything but simple, since it was found to having developed over the years, with multiple connotations referring to aspects from politics to economics. Through analyzing 114 different interpretations, the herewith proposed definition attempts to merge these numerous descriptions by defining it as the following: “Globalization is a process that encompasses the causes, course, and consequences of transnational and transcultural integration of human and non-human activities” (Al-Rodhan, 2006, p. 2).

Based on this, one can argue that internationalization functions as a subtrend to globalization, even though it does by all means have a certain overlap. For more than 20 years, the definition of internationalization was subject to many discussions, since it is not a new concept either, like the previous one, but one that has been used for centuries in political science and governmental affairs. The challenging part of developing a definition is the demand for considering its broad applicability and ensuring that the following research is not based on a universal definition, but one that has an appropriate meaning to it. Therefore, the standard and widely cited definition has been adapted to suit the needs of this study and therefore suggests to be the following: “Internationalization at the national, sector, and institutional levels is defined as the process of integrating an international, intercultural, or global dimension into the purpose, functions or delivery of […] [business services]”(Hawawini, 2016, p. 4).

Based on the identification of this rather dynamic relationship between the two trends, it can be argued that globalization clearly offers new opportunities, challenges and threats, however that it is important to keep in mind, that it needs to be seen as a process impacting internationalization. In other words, internationalization is changing the world of business while globalization is changing the world of internationalization (Knight, 2003, pp. 2-3). As a result, it can be argued that the trend of globalization needs to be assigned to the field of macroeconomics while internationalization stems from the business environment, therefor suiting the analysis scope of this paper.

A theoretical approach that underpins the applied structure of this work is the Uppsala model, a theory that describes how companies gradually strengthen their internationalization activities by distinguishing between a temporal and a local pattern (see appendix D-I). The temporal pattern describes how companies first gain experience in their home market and then start exporting. If this step is successful, foreign representative offices are set up and production may be relocated abroad. The local pattern describes that companies first venture into markets that are physically closest to them, only then to move to more culturally or geographically distant markets. The orientation along this model was selected, due to the high suitability of the tool, especially gained through its extension in 1988, adding the six dimensions of internationalization (see appendix D-II), of which only one has to be adapted slightly, in tandem with the unsuitability of comparable instruments, as can be substantiated by the later explanation of the change approach(Hollensen, 2010, pp. 63-67).

This goes back to the additional underlying parameters, which need to be introduced in order to ensure a mutual understanding. What is to be addressed by means of this paper, is an internal project, therefore certain terms will be used in the further course of the examination which may deviate from the presumed meaning. For instance, the customers, who are usually defined as the purchaser of a product, are in the present case the process owners within the community. Consequently, there is no such thing as a sales market, but certain countries and regions in which structures may or may not be in place or processes carried out. Moreover, and with a reflection on the Uppsala model, we are not aiming at a certain sales potential but for cost reduction. Through these examples, the author hopes to give the reader a deeper understanding of the matter of the work.

2.2 Necessity for and modelling of Change Management

The review of change and its management as part of this paper is inevitable for two reasons. Firstly, because the subject which is to be internationalized is a change and enabling project and secondly, because the process of internationalization itself requires change, since it is not only a fundamental reorientation, but touches aspects which are deeply rooted in culturally coded traditions (Roth, 2015, p. 4), an issue elaborated on in the next chapter.

Alike the two terms above, it must be noted that change management is a very far-reaching term that has many facets in its complexity and cannot be clearly distinguished from other constructs, yet once again one can argue that it was possible to achieve a uniform understanding of the terminology through the review of multiple definitions. For the further course of this paper, the term change management will be defined as the goal-oriented, strategic transformation with focus on the (corporate) strategy, its processes, structures and culture. The aim is to make this change as efficient as possible and to integrate the people concerned into the process (Spichalsky, 2016, pp. 9-12; Rank & Scheinpflug, 2010, pp. 18-19).

To give the reader a better feeling for scale and scope of the project, the content can be outlined as a transformation, which enforces a change from a hierarchical organization with operational accountants to a community structure in which new roles as process owner are assigned to these existing employees. Accordingly, the way of communicating and cooperating is changing, new roles require altered competences as well as qualifications and an acceptance for the new construct must be created in the entire organization in order to increase commitment. In order to achieve this wide-ranging and multi-faceted goal, a concept is needed to structure the execution of this international change plan.

Examined on the premise of the aforementioned definition were two seminal, theoretical approaches, which can be distinguished into micro- and macro-level, whereby in the former category the three-phase model according to Lewin can be found, commonly treated as the basic approach to change management, which divides the change into the three phases unfreezing, moving and (re-)freezing. For the present project, however, it must be described as unsuitable because of its rigid and inflexible nature, since each phase is delineated as completed and thus no seamless transition is possible as it can be observed in practice. An example for the macro level is the eight-phase model according to Kotter, which presents itself as a more detailed, further development of the previous one, focused primarily on eight steps or tasks a manager is obliged to fulfill in order to ensure a successful transformation. Yet it is just as unsuitable, due to the disregard of a bottom-up perspective and the immanent emphasis on the top-down approach(Spichalsky, 2016, pp. 13-14, 16-17, 20-21).

By virtue of the unconventional structure and the rather agile approach within the project, a method is required that adapts flexibly to these volatile, fast-moving conditions. For this reason, Lean Change was selected as the applicable concept because it combines best practices from various areas with an agile approach. This is being realized in the first step of the cycle by generating insights, from which options are extracted in the next step and finally discussed as well as ultimately implemented and reflected with the help of experiments (see appendix E-I). Although the scope of the work limits the explanation of the concept in depth, its application is legitimized by the tailored support of non-linear change processes with the help of a contextualized and adaptable approach (Kollischan, 2016, pp. 38-43; Scheller, 2014, pp. 64-69). This can be substantiated by reviewing the hitherto and planned development of the project, which analyzed the status quo (insight), developed the option of introducing a PO community on the basis of a collaboration model, implemented it in a small, national environment (experiment) and will be going through the same circle when upscaling to a global environment after generating lessons learned (review).

2.3 Influence of corporate and national cultures

In a process of change, independent of the subject area, culture will always be primarily affected, since it cannot only be a great enabler for a future transformation, but also reflects the current situation of the organization, which is to be changed. Those and similar reasoning can be ascribed to the broad agreement on statements such as 84% ¹ agree that their organization’s culture is critical to business success and 60% say culture is more important than strategy or operating model (Aguirre, von Post, & Alpern, 2013). While cultures itself as a whole is being defined as “the collective programming of the mind that distinguishes the members of one group or category of people from others” (Hofstede, 2009, p. 1), there are two different types of cultures which need to be take into account individually when addressing such an issue.

On one hand, there is national culture, which is in the main composed of six elements. While it can be argued, that the cultural dimensions model oversimplifies complex behavior to certain points, the method offers a rapid understanding of culture and is supported as well as confirmed in its central parts and results by comparing it with its major alternative (Leung et al., 2005, p. 366). The dimensions range from power distance and the question of how much inequality may and can prevail between people, to the relationship between individualism and collectivism describing the extent to which the interests of an individual are subordinated or superior to those of the group resulting for instance in different communication styles like high and low context communication. Furthermore, the socio-cultural dimension of masculinity/femininity, exploring the question of which gender is (traditionally) responsible for which tasks in a certain society as well as uncertainty avoidance, primarily concerned with how unknown situations are dealt with. Finally and in order to combat criticism which accuse the model, among other things, of relying on old data, being limited to one company and containing too few dimensions, the time component was added through long and short-term orientation referring to the trade-off between quick wins and sustainable solutions. For similar reasons the final dimension of enjoyment and restraint was added in 2010 to generate a holistic picture, mainly classifying the national levels of subjective happiness and life control (IKUD Seminare, 2017; Towers & Peppler, 2017, pp. 16-18).

On the other hand, there is corporate culture, which Edgar Schein of MIT’s Sloan School of Management defines as “a pattern of shared basic assumptions that the group learned as it solved its problems of external adaptation and internal integration, that has worked well enough to be considered valid and, therefore, to be taught to new members as the correct way to perceive, think, and feel in relation to those problems” (Tharp, 2009, p. 5). Corporate culture has long been considered an integral part of proper management theory, the object of which has always been the comprehensive design, management and development of complex social systems, making the usefulness of good cultural contributions beyond question(Domsch, Hofmann, & Lattmann, 1990, p. 21). In terms of content, corporate culture is the totality of traditional, changeable and time-specific ways of thinking and norms, which can be experienced and learned through symbols and values, thereby shaping the behavior of all employees and the corporate identity of the company. One can argue that this approach is even in line with Schein’s layer model of corporate culture(Rathje, 2004, p. 114). Going into the necessary detail for understanding the concept and the interaction of these five pillars, tradition means that the origin of the appearance of an enterprise lies in the past and has developed over time into an orientation pattern for current behavior. Ability to change on the contrary indicates that the corporate culture is not static, but develops continuously within the framework of the higher culture of society, in which the company must be able to function. If this ability is not provided, the company will perish because it can no longer survive. Furthermore and with regard to the time specification, time-dependency means that, on one hand, the corporate culture is contemporary, meaning it is in harmony with the overarching culture, and on the other hand, it is temporal, implying it had to achieve its image through the long-term preservation of values and norms, but never permanent. Finally, experiencability means that corporate culture is accessible and understandable through symbols and can therefore be perceived, while learnability means that it can be adopted by an outsider, if he or she considers it to be desirable and develops the ability to integrate into his or her own culture (Domsch, Hofmann, & Lattmann, 1990, pp. 6-7).

With reference to the present framework conditions and the problem, it can be argued that it is quite difficult to separate the two introduced aspects from one another because in terms of its setup and way of operating, the company serves as a perfect example for a German company that operates worldwide, but is still culture wise deeply influenced by its national roots. This is why in the further progress of analyzing and drawing conclusion, the intercultural organizational development must be taken into account, with individual solutions for each region, yet without neglecting the underlying historical, national character of the family business (Rathje, 2004, pp. 113, 121-124).

3 Analysis and generation of insights

3.1 Environment and the origin of the project

Employees around the world report that major organizational changes affect their workplaces, yet according to a survey of more than half a million U.S. workers, nearly one-third did not know the reason why these changes were taking place. This can be detrimental to any company trying to transform, by being a barrier to driving ownership as well as commitment and can even result in resistance and ultimately the failure of the respective change project. For this reason, it is inevitable to show the big picture by providing the reason and starting point for the transformation, because especially in times in which change is omnipresent, there needs to be a clear prioritization between the multiple changes that are going on in parallel(Galbraith, 2018, pp. 1-2). For this reason and in order to be able to ensure a holistic and valid project planning as well as a sound basis for successful internationalization, it is essential to take a close look at the environment and the origin of the project. At this point, it shall specifically be aimed at gaining a deeper understanding of the underlying benchmark study so that one will not lose sight of the primary goal, but also to continuously review and adapt the project approach to possibly changing conditions.

Firstly, the already mentioned Finance & Controlling Benchmark and Re-Benchmark studies of the Hackett Group, which can be described as a preliminary study, underpin the economic and entrepreneurial necessity of the overall 1A@B project and, consequently, of the resulting CMCEC sub-project. It was primarily concerned with measuring performance in the financial sector in order to identify strengths and weaknesses, to develop optimization measures as well as measuring their progress. For this purpose, a detailed and far-reaching analysis was carried out, which evaluated the company in terms of process effectiveness as well as efficiency and visualized the results in the so-called value grid (see appendix F-I), in order to compare them with external points of reference across industries and nations (The Hackett Group, 2018; Grosse & Arway, 2017, p. 8). The positioning, but much more the development of CF in the value grid, which is divided into so called quartiles, show that effectiveness has mainly improved from Q3 to Q2 and that efficiency has developed to the edge of Q2. Although this shows progress in both areas, it also reveals that there is still a significant gap to the performance leaders. The quantitative findings prove that the shift to the GSAs was a decisive factor for those performance increases, substantiated by the quantitative results on the example of total cost development. Identified shortcomings were discovered to be high error rates effecting the effectiveness perspective of the accounting area, but also that an enormous booking volume is still being processed with the help of low standardized or non-automated processes combined with internal organizational complexity hindering the GSA to exploit their full potential (see appendix F-II).

Continuing in chronological order, the CMCEC project can subsequently be legitimized as such through the confirmation of its project worthiness, clearly distinguishing the project from line or project-like tasks, on the basis of order value, number of employees involved and the strategic importance. The need for this explicit and quantitatively verifiable confirmation of the project character stems from the development of the term project into a so-called buzz word, through which many task packages were generally referred to as a project, regardless of the specific circumstances. As a result, the organizational project portfolio was unnecessarily inflated and the capacities and resources required for management, controlling, etc. were inefficiently tied up (see appendix G-I).

3.2 Stakeholder and risk assessment

Furthermore, the parties who have a justified interest in this very project were identified within the scope of the stakeholder analysis and subsequently evaluated with regard to their interest in as well as influence on the project. On top of that, their individual success factors for optimal penetration were worked out(Fischer & Pfeffel, 2014, pp. 121-122). The resulting prioritization primarily places three parties in the focus of the support: The vice president accounting of CF predominates due to his hierarchical influence on the project and enormous interest in the project due to his responsibility towards the management. Followed by the Center of Governance known as ACE, whose evaluation stems from the combination of holding the project sponsor function and the responsibility for the entire PO community. The project lead for the overall project 1A@B has a similar prioritization, which can be traced back to the responsibility and decision-making power over this project and the sub-project derived from it (see appendix H-I).

The analysis of the stakeholders is necessary in this form, because the implementation of a change requires the highest possible acceptance value from these groups as a whole. The implementation of the strategy packages, which are to be derived from these insights, depends not only on the added value it potentially generates, but also on the extent to which those involved and affected stand behind it and support its implementation. In addition to the actual quality of the results, there must therefore be an awareness of the influence and attitude of these stakeholders in relation to the project and among each other in order to be able to use synergies or treat conflicts preventively(Fischer & Pfeffel, 2014, p. 118).

Prior to highlighting and explaining the results of the risk analysis, it should be noted that these, due to the nature of the project, focus almost exclusively on internal risks and their prevention. This exhibition of project-related risks that can occur within the organization is divided into two stages. Firstly, potential risks were identified on the basis of the usual over categories and ranked with regard to their probability of occurrence and the associated damage. The resulting gross risk matrix shows risks of an economic nature with the greatest loss and technical risks with a low impact but highest probability of occurrence. The highest overall gross risk, however, is on the personnel side and primarily concerns quality and access to resources in most of the selected regions (see appendix I-I & I-II). It can be argued that the examination of the net risks is of even greater relevance for the project, since alternative courses of action can be identified in order to be able to counteract these risks effectively. Continuing the calculation from the previous procedure, the gross risk is reduced by the damage reduction probability, which results in the net risk. The comparison of the two risk types shows that the three risk categories previously examined could be reduced strongly to a manageable level, so that a 40% lower risk must now be effectively taken into account in the management of the project(Fischer & Pfeffel, 2014, pp. 213-222).

The necessity of this dedicated risk assessment is based on empirical values which show that, as a rule, the later the risks are discovered and addressed the higher the damage, while at the same time the means to be used to counter it increase and additionally the number of alternative courses of action for coping with it decreases. In order to therefore keep the risk reserves to be formed in relation to the potential financial added value within an acceptable frame, a risk controlling system based on this is essential that comes with a robust project planning(Paetzmann, 2012, pp. 71-72).

3.3 Internal competitive situation and customer requirements

The analysis of the CF project portfolio focused on assessing the business requirement of all current projects including CMCEC and matching them with their respective prioritization criterion consisting of three aspects: The added value for standardization, the savings potential as well as the damage that would be suffered should the project not be carried out. In principle for CMCEC, there is a certain risk, but relative to the other projects, this is comparatively low to consider in the present case, since a rejection of the project demand for resources would not be associated with an entrepreneurial inability to act, but with the missing out on hoped-for and planned improvements (see appendix J-I). The visualization of the results of the scoring model with the help of a matrix opens up the possibility of including the variable of the budget in the consideration with the help of the circle size (see appendix J-II). This shows that the CMCEC project is the fifth last of the twenty focus areas currently in CF PMO. While the prioritization and business requirements are just below average, the scope and the calculated budget are far below average. Further findings from the analysis with regard to the internal competition discussed at the beginning are the identification of direct and indirect competitors of the project. For this purpose, the scoring matrix can be divided into clusters based on classic market segmentation with the help of strategic groups. The project can be found again in the group with average values, which stands out as the second strongest category after the high score cluster, but before the low score cluster and the collection of projects with average to high prioritization but less relevant business requirement. This consideration provides information about the distribution of management attention and possible shortages in resources that may result in the emergence of risks that need to be considered (Hadwich, 2009, pp. 31-35).

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¹ The survey drew more than 2,000 responses from participants in a range of industries and geographies.