"Corporate Planning in the Nineties"

Good afternoon Ladies and Gentlemen. The subject of my talk this afternoon is Corporate Planning in the Nineties.

I should explain that the particular case study I am going to describe took place in late 1989/early 1990 in the Exploration and Production arm of British Gas plc. I had been asked as an external consultant to help them consider their corporate needs for the next decade.

During the late 1980s, in the post-privatisation era, British Gas E and P had expanded dramatically through organic growth and through acquisition. This had resulted in a Corporate Structure with two operational offices, in London and Houston, managing the E and P activities across the world and a separate London based Corporate Group supporting the Managing Director and providing a Corporate Planning function. They also intended to expand further within the '90s in the same way. As such, it was necessary for the company to identify a control base for this growth. There were two particular requirements; firstly a corporate planning process that could fulfil this function, and secondly it required a predictive tool to be used in the corporate planning process in the form of a numerical model. It was necessary for both of these factors to include consistent standards across the company, and meet the needs of management and employees.

The rest of my talk will be split into three distinct sections. Firstly, I would like to consider the planning time frames and the fundamental requirements that were necessary. Secondly, to look at the data flows, the organisational factors and software and hardware selection criteria that were necessary and then, finally to consider the definition and construction of the model and the final implementation.

Model Time Frames

It was necessary that the overall modelling process covered the requirements for models that addressed various time frames and also provided specific information for these time frames. The major categories of forward looking models were identified as firstly, short term models, on a one to two year basis. These were primarily for monitoring cash flows, expected operating results and for budgeting preparation and support. Secondly, medium term models of 1 – 5 years which were primarily for mid range planning and for reporting into central financial planning processes, and thirdly, long term models which were 5 years plus, covering life of field for economic analysis, corporate strategy and the planning of major projects and acquisitions and which were also required for input to the British Gas plc Company Plan. These models would provide cash flows, operating results, forecast and expected returns, in the longer term at a higher level than the short term model.

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