An innovative approach to hedge against macroeconomic ......Proof of Concept: India operations macro-economic tool •Develop a dynamic macroeconomic forecasting tool for India operations
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– The independent variables would reflect, individually, level of significance, significant or insignificant, on the variability of overall costs
Cost driver Model Dependent Variable
Context Independent Cost drivers – To realize the greatest return from cost
driver analysis, tool assesses the relative impact of each ICD
component against overall reported costs and overheads
Multifactor Tool: Cost drivers and its impact
• Companies, such as HP, in an industry
at maturity faces increasing level of
competition and erosion of pricing
power
• Previously considered insignificant
costs are management priorities for
restoring healthy margins
• Traditionally reported costs, i.e.
Inventory costs, accounted only 10% of
inventory’s total effects on profits
• Cost driver driven impact, going
beyond traditionally reported costs,
employed for impact assessment
– The established relationship between the drivers and overall costs would enable the user to manage significant cost drivers for restoring healthy margins
contained herein is subject to change without notice. Confidentiality label goes here
Macroeconomic Tool... Solution architecture
MS Excel database
Analyse SCENARIOS
Adjust Drivers
Actual Data
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Indices
Drivers
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Revenue
GRAPHS
Regression
To realize the greatest return from cost driver analysis, tool assesses the relative impact of each ICD component against overall reported costs and overheads.
EIU Reports
Financial Reports
1
1 Financial data is taken from the financial pro-forma numbers and macroeconomic data is taken from EIU Reports. Theyget uploaded in the tool’s database
contained herein is subject to change without notice. Confidentiality label goes here
Actuals and Aspire * Macro-economic data Drivers
DATA REQUIRED
• Income Statement
- Revenue
- COGS
- SG&A
• Balance Sheet
• Cash flow statement
• Inflation
• IIP
• Interest
• Exchange Rate
• GDP
• WC
• Short Term Borrowings
• Commodity/Fuel Costs
• Direct Labor
• Marketing Costs
*Preferably as detailed as possible – quarterly basis for the maximum possible duration. In addition, we would request for actual data and original aspire data .