Success Factors and Risks of an Organization

Running Head: FINANCIAL PERFORMANCE AND HEALTH OF AN ORGANIZATION
Success Factors and Risks of an Organization
Wesfarmers
Student Name
Date

FINANCIAL PERFORMANCE AND HEALTH OF AN ORGANIZATION 1
Final Project Milestone Two – Module Five
Success Factors and Risks
Strategic Priorities
Accounting procedures and business decisions of any firm are directly based upon its
financial and strategic priorities as it impacts how the firm executes its business. The risk and
return objectives are set by the board and then the business strategy is made accordingly. The
management can set financial and strategic priorities to achieve these goals. Wesfarmers has
recently decided to cut its debt level so as to reduce its financial leverage (Wesfarmers, n.d.).
This change has strengthened the firm’s balance sheet and now it is looking for new
opportunities to expand its operations (Hatch, 2019). So, the firm’s business decisions depend
upon its financial priorities and corporate strategies.
The orientation of the firm can be inclined more towards growth or efficiency. Growth
oriented management gives more attention to the sales and marketing divisions to increase
the firm’s revenues. Efficiency oriented management puts more focus on the process and
procedures to properly execute the strategies at all levels. A mix of both strategies is required
for the organizations for sustainable success. Wesfarmers management is more oriented
towards the efficiency and it focuses on strengthening the group’s existing operations by
having proper procedures. It uses detailed strategies at a divisional level that are focussed on
finding the specific opportunities to improve all of its businesses. It tries to create value via
the strengthening of its existing businesses by achieving excellence in operations to satisfy
the needs of its customers (Wesfarmers Shareholder Review, 2018). Due to the efficiency
oriented management, the group makes business decisions to achieve perfection in its
business- products and services, to have high levels of customer satisfaction.

FINANCIAL PERFORMANCE AND HEALTH OF AN ORGANIZATION 2
Wesfarmers’ management is responsible for the compliance of group activities with the risk
management framework on day to day basis. In May 2018, the group approved its risk
framework, which focuses on the long term risk management for sustainable growth. This
framework guides all the business decisions of the group by providing the proper guidelines
and limits for capital expenditure approvals and all other investments including contractual
commitments. All the business divisions of Wesfarmers do the annual budgeting and monthly
reporting to examine their progress in comparison to performance targets. These parameters
are then utilized in the decision making process to maximize the profits of the group without
breaching the risk targets. The risk policies also impact the overall outlook of the group in the
long run as proper due diligence procedures and guidelines need to be followed for all the
acquisition and divestment activities (Wesfarmers Corporate Governance Statement, 2018).
Earlier Wesfarmers used to give more emphasis towards meeting its budgeted targets in the
short run and that influenced its business decisions. In 2017, group’s management changed
and that also changed the focus of Wesfarmers towards the long term value generation. This
change is visible in the company’s decision of selling/spin-off it’s various assets: Coles,
Kmart Tyre & Auto and Bengalla coal mine stake (The Patient Investor, 2018). The group’s
business model is based upon its framework: The Wesfarmers Way (Wesfarmers, n.d.). It
includes guidelines related to the core values, enablers of growth and value strategies. The
major attribute of this strategic planning framework is to maintain a long-term focus and to
act sustainably for value-creation and business-building. Wesfarmers consistently invests in
the business divisions which offer higher investment opportunities than the required return. It
acquires or divests businesses in order to manage group’s balance sheet towards an
appropriate risk profile, while maintaining the flexibility to invest in the new business
opportunities (Wesfarmers Annual Report, 2018).