Help me formulate questions regarding Strategic Financial Management (using How and Why only) with this topics:

1. Strategic Role of Finance

2. Managing Risks

3. Challenges

4. Strategic Value Drivers

5. Strategic Financial Planning

6. Stock Price Maximization

7. Shareholder Value and wealth creation

8. Value drivers for shareholder wealth creation

I attached the discussions about this topic below:

Perspectives on strategic finance 1.1 Strategic role of finance Strategy basically refers to how resources are to be deployed through a combination of products, markets and technologies. The basic purpose of the finance function is to ensure the timely acquisition and efficient utilization of funds so that strategic goals are achieved. Financial resources are the foundation of the strategic plan and financial value is the unifying factor which bonds products, market and operating decisions associated with strategic options. The financial aspects have a major role in strategic aspects like the type of assets the firm acquires, the rate at which they are acquired and the ultimate size of the firm. Investment, financing, operating, and dividends decisions are the major strategic financial decisions within a firm. The primary finance function is to identify and plan for the proper mix of financing to support strategic activity and to ensure that funds are employed to achieve expected returns. The unifying financial goal for any profit seeking enterprise would be the maximization of the net present value of the projected cash flows, discounted at the cost of capital. In modern world, the finance manager ought to be more skilled in managing people and managing risk rather than in aspects of financial reporting. The role of financial director in an organization is becoming increasingly relevant in the context of uncertainty, flexibility federalism, and downsizing [1]. Financial Director is the one director who would be frequently consulted on every strategic decision a company takes. In the context of the trend to reduce the size of the corporate headquarters, however lean and mean a company is, it must produce consolidated accounts and reports to shareholders and authorities. Hence there is a need for adequate financial staff to handle these tasks even in decentralized organizations. Finance function is the central fulcrum which holds businesses together, manages its controls and information in a decentralized step up. It can be argued that in the long run, all planning leads to financial planning. The role of financial directors has become more challenging and sophisticated while dealing with information systems, treasury management, authorities, shareholders, and investing institutions. The strategic role of finance can be explained in the context of strategy implementation, strategic change and strategic flexibility. Finance is the main link between strategic plans and their implementation. The deployment of funds in capital expenditure programme is an example of how finance function becomes important in strategy implementation. Companies like ABB allows its finance department to play a proactive role in strategy implementation [1]. Financial managementand information systems need to respond to organizational changes. Finance function has to respond fast to opportunities in the context of strategic flexibility. Finance department has to identify the essential information needs to the management. The major key elements of strategic finance function are strategic planning, establish- ment of the optimum capital structure, managing key financial relationship with outsiders, implementation of the financial policy, operational financial planning which includes capital expenditure programs, cash planning, and balance sheet planning. The other key elements include treasury management, debt structure and risk management. The economic viability measures include performance measures and budgeting systems. The element of quality control involves information systems, standards, and procedures. The finance team consists of Finance Director, the controller, the treasurer, senior departmental managers and, business unit financial managers. The finance director is a member of the top management team who is concerned with the strategic direction of the business. Controller is also a part of the core strategy making group which is involved in the implementation of strategic decisions. Finance functions also contain specialized departments like mergers and acquisition (M&A) team information departments. Finance function provided direct input into Unilever's long, medium and short term plans as well as their cost reduc- tion programs and innovation projects. Unilever developed a culture in finance of innovative business partnering, continuous improvement and capability development which enabled the finance team to play an active role in delivering Unilever's growth strategy. 1.2 Managing risk Investors are assumed to maximize investment return. In quantitative sense risk is the measurement of standard deviation of returns. Statistical techniques are used to manage risk. Historical risk estimates are used along with expected return forecasts to generate asset allocation strategies and portfolios which are optimal with respect to risk and return. Managing risk involves various dimensions of risks like competitive risk, project risk, exchange rate risk, and interest rate risks. International diversification is a technique for managing risk. The concept of global diversification ensured that different types of risk could be diversified improving the risk/return trade off. 1.3 Challenges Modern businesses in the context of globalization, competition and decreasing margins have to focus on ways to drive business performance. Businesses rely on timely and relevant quantitative data to arrive at strategic decisions. It has become increasingly important to focus on value innovation which advocates on maintain- ing core business strengths while continuously developing new value additive ideasand strategies. Enhanced understanding of risk factors, updated competitive analysis tools, improved valuation, and projection models are all relevant in modern environment. Modern nancial managers must have understanding of control systems and operational risks. Cash management. capital budgeting, earnings volatility. and forecasting demand are the signicant challenges faced by managers. The context of increased contagion in the global nancial markets creates challenges of manag- ing interrelated employment, debt reduction, monetary policy, and exchange rate policies when companies plan expansion. treasury hedging and capital management, and acquisition strategies. 1.3. 1 Strategic value drivers Mills [2| identify seven value driverssales growth rate, operating prot margin. cash tax rate, xed capital needs, working capital needs, planning period. and cost of capital. The selection of an appropriate planning period is vital for generating future cash flows based on short term and long term perspective. The estimation of the planning period can be explained in terms of ve forces identied by Michael Porter. The planning period needs to be explained in the context of potential entrants, possibility of substitute products, relative power of suppliers and buyers and by the degree of competitive rivalry within the industry in which it exists. For example. in the context of planning period, the company may incorporate the threat of new entrant in the market within a ve-year period as the present barriers to entry act as a competitive advantage for the company. Organizations which focus on relative performance creates the most value. The strategic value analysis approach must have a long planning period aimed at creating good sales potential and free cash flow. Competitive advantage is the result of the core competences nurtured by an organization. It results from the collective learning of the company in terms of diverse production skills, integration of different streams of technology, patterns of communication and managerial rewards. Strategic value creation results from the creation of a strategic architecture. Strategic architecture involves identication and development of technical and production linkages across business units which in turn leads to development of distinct skills and capabilities which cannot be replicated easily by other organizations. John Kay have identied four aspects of core capabilitiesreputation, architeCmre, innovation, and strategic assets. Reputation facilitates companies to follow price differential strategy whereby they could charge premium price for products or gain larger market share at a competitive price. The unique structure of relational contracts that may exist within or around rms is referred to as architecture. Airline industry develops networks through strategic alliances which in turn provides cost effective ways of providing international services to customers. Marks and Spencer's strategy of growth is based on the development of its supplier architecture. Innovation is also a major source of competitive advantage. Companies like Apple creates value through successful product innovations. Strategic assets are sources of competitive advantage based on the market position. Fundamental value is based on the present value of expected free cash flows. Shareholder value is firm value minus the value of outstanding debt. Firm value can be based on book value or market value. Market value is based on the stock market performance of a company. The most widely used practical measure of shareholder value is Total Shareholder Return (TSR) which is based on stock price appreciation plus dividends. Companies create value by means of investing capital at a higher rate of return when compared to its cost of capital. Companies with higher returns and higher growth are valued more highly in the stock market. Knowledge assets are organizational resources which are integral for company's value creation. The strategic relevance of knowledge assets has led to the genera- tion of new concepts and models for managing a company's knowledge assets. Intellectual Capital has emerged as a key concept to evaluate the intangible dimen- sion of an organization. The modern economic world is based on the foundation of new technologies, globalization, and increased relevance of intangible assets. Value creation is often perceived as the future value captured in the form of increased market capitalization. The new global economy has led to the emergence of new business models where companies are combining both old and new economy assets. New processes and tools are required to manage the risks on account of new business models. The greatest challenge a company's face today is identication of the combination of tangible and intangible assets which create the greatest amount of economic value (EV). Every asset, nancial as well as real has value. The key to fundamental aspect of investing and managing assets lies in understanding of not only what value is, but also the sources of value. A value driver is a performance variable which impacts the results of a business such as production effectiveness or customer satisfaction. The metrics associated with value drivers are called key performance indicators (KPIs). Value drivers should be directly linked to shareholder value creation and measured by both nancial and operational KPIs which must cover long term growth and operating performance. The three commonly cited nancial drivers of value creation are sales, costs and investtnents. Earnings growth. cash flow growth and return on invested capital are specic nancial drivers. Protability, growth, and capital intensity are considered as important drivers of free cash flow and value of a rm. The KPls also include nancial measures such as sales growth and earnings per share (EPS) as well as nonnancial measures. The nonnancial performance measures include product quality, workplace safety, customer loyalty, employee satisfaction and customer's willingness to promote products. The nance functions in large organizations had earlier focused on cost control, operating budgets and internal reporting. Institutional and managerial forces shape the critical functions of nancing, risk management and capital bud- geting. Multinational firms exploit internal capital markets to gain competitive advantage. 1.3.2 Strategic models of valuation Value-based management (VBM) focuses on the application of valuation principles. In VBM system, the components of the employees' work should be identified and linked to profitability, growth and capital intensity. The actual performance should be measured, evaluated and rewarded in terms of targets for profitability, growth, and capital intensity. Value creation is traditionally considered as a chain of activities. The field of corporate finance was revolutionized by introduction of mathematical models of capital asset pricing model and the Black Scholes Merton option pricing model. Value based business strategy was adapted by A Brandenburger. Harborne Stuart applied mathematics to the evaluation of strategic decisions through mathematical linkages. Value capture model (VCM) defines competition in an industry as a tension between the value generated from transactions that a firm undertakes with a given set of agents and the forgone value it could have generated from transactions with other agents. Cooperative game theory could be applied effect tively in studying competitive dynamics. VCM model of competition allows a firm to identify potential payoffs to investments in resources and capabilities supported by big data. The resources and capabilities which influence value are deployed with competitive intent. 1.4 Strategic financial planning Goodstein et al. [3, p. 2] define strategic planning as "the process by which an organization envisions its future and develops the necessary procedures and operations to achieve that future". Strategic Planning involves the selection of the most important choices of organization in terms of objectives, mission, policies, programs, goals, and major resource allocations. The long term perspective for assessment of value creating opportunities with the strategic framework is essen- tial for the firm's future. Gluck et al. [4] suggest that firms evolve through at least four stages in developing capacity for effective strategic management. The first stage of simple financial planning focuses on developing annual budgets, financial objectives which are driven by activity schedules aimed at meeting budgets and objectives. The second stage is forecast based planning which is dominated by multiyear budgets and driven by attempts to forecast the future. The third stage termed strategic planning consists of situation analysis, environmental assessment, and identification of strategic alternatives in the context of strategic thinking. The final stage encompasses the evolution of strategic management stage which is influenced by explicitly articulated strategic vision and leadership, supportive structure and systems, staff, and skills. Taylor [5] suggest five key strategic planning modes of central control system, framework for innovation, strategic management, political planning, and futures research.1.4. 1 Stock price maximization Stock price maximization is one of the signicant factor for value maximization objectives. Stock prices are the most observable of all measures which can be used to judge the performance of a listed company. Stock prices are constantly updated to reect new information about a firm. Thus managers are constantly judged about their actions with the benchmark being the stock price performance. Book value measures like sales and earnings are obtained only at the end of year or in each quarter. Stock prices reflect the long term effects of a firm's business decisions. When rms maximize their stock prices, investors can realize capital gains immediately by selling their shares in the rm. An increase in stock price is often automatically attributed to management's value creation performance. At the same time, the stock price might have increased due to macro-economic factors. 1.4.2 Shareholder value and wealth creation The concept of measuring and managing shareholder value is of paramount importance on account of the increasing relevance of capital markets and corporate governance. In the era of globalization of markets. investors have easy accessibility to raise funds. The shareholders of the company desires transparency in the opera- tions of the company and places much signicance to the corporate governance practices. Today no underperforming company is safe as always there is the threat of hostile takeovers. Hence the managers of firms have to perform to improve the value of the company. The criticism with accounting measures such as EPS and prot or growth in earnings is that they do not consider the cost of investment made for running the businesses. Shareholder is the main pivotal stakeholder or fulcrum of the business activity. Firms which don't create value for shareholders faces challenges like risk of capital ight, higher interest rates. lower efciency and productivity and threat of hostile takeovers. Maximization of shareholder wealth is the main objective of any value creating organization. The value perspective is based on measurement of value from accounting based information while wealth perspective is based on stock market information. Economist's viewpoint suggests the rms create value when management generates revenues over and above the economic costs to generate these revenues. The economic costs are attributed to sources like employee wages and benets, materials. economic depreciation of physical assets. taxes. and opportunity cost of capital. Value creation occurs when management generates value over and above the costs of resources consumed. including the cost of using capital. A company which loses its value faces the daunting task of attracting further capital for nanc- ing expansion as the declining share price becomes a detrimental factor for value creation. In such a scenario. the company is compelled to pay higher interest rates on debt or bank loans. Wealth creation refers to changes in the wealth of shareholders on a periodic (annual) basis. In the case of stock exchange listed rms, changes in shareholder wealth occurs from changes in stock prices, dividends, equity issues during the period. Stock prices reflect the investors' expectation about future cash flows of the firm. Shareholder wealth is created when rms take investment decisions with positive NPVr values. The real or true value of a stock or intrinsic value includes all aspects of company in terms of both tangible and intangible factors which affect the value of a company and subsequently the perceived value of a share of stock. 1.4.3 Value drivers for shareholder wealth creation Value drivers are variables which affect the value of the organization. The main value drivers for shareholder wealth creation are intangibles, operating, investment and nancial. Increase in shareholder value results from improvement in cash flow from operations. Value enhancement can also result from minimizing the cost of capital by focusing on optimal capital structure decisions. The value drivers for increase in cash flow from operations are higher revenues, lower costs and income taxes and reduction in capital expenditure. No company can maintain their operation and produce great wealth for its shareholders without stable and rising revenue which comes from customer. The strategic requirements for higher revenues consist of patent barriers to entry, niche markets, and innovative products. The strategic requirements for lower costs and income taxes are scale economies, captive access to raw materials, efciencies in processes of production, distribution, and services. The strategic requirements for reduction in capital expenditure are efcient asset acquisition and maintenance, spin offs, higher utilization of fixed assets, efciency of working capital, and divestiture of nonperforming assets. The value drivers for reduction in capital charge are reduced business risk, optimization of capital structure, reduction of cost of debt, and cost of equity. The strategic requirements for reduced business risks are superior operating performance and long term contracts. The strategic requirement for optimal capital structure involve maintaining a capital structure that minimizes the overall costs which optimizes tax benefits. Companies often adopt different strategies for value creation. Companies like Sony, Apple, and Microsoft often introduce new products for enhancing shareholder value creation