Rethinking Capital Allocation for the New Normal:
Re-allocation and Rightsizing towards New Growth and Value Creation
Pschemyslaw Pustelniak | Dr. Philipp Schaller | Jens Pfeifer
Jul 2020
| Strategy Paper
| Inglese
Rethinking Capital Allocation for the New Normal:
Re-allocation and Rightsizing towards New Growth and Value Creation
Systematic capital allocation is a distinguishing factor for successful and outperforming companies in the long term. The current economic crisis, triggered by the COVID-19 pandemic, has highlighted the need to re-allocate capital to those business models flourishing in a new normal and to resize the relevant resources and costs accordingly. To leverage this opportunity, CFOs should focus on four imperatives of capital allocation as part of their recovery strategy. With a systematic approach to capital re-allocation in hand, companies are able to recover from crises faster and much stronger than their peers.
Management Summary
- Companies that systematically allocate capital and rightsize structures far outperform their peers
- Re-allocating capital and rightsizing cost structures are essential parts of both a crisis response and a recovery strategy for the new normal
- Executives, especially CFOs, must act now and take a strategic approach to enable future growth as a basis for sustainable value creation
- Four capital allocation imperatives provide CFOs with a pragmatic toolbox to navigate their companies through these turbulent times
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