Why are we talking about capital allocation now?

Finance leaders constantly weigh the return of their business’s time, resources, and human capital investments in their efforts to maximize the organization’s health and shareholder value. But what about analyzing the investments themselves? Capital allocation challenges can be a lot to untangle. Here’s why we’re talking about it now:

A changing world: COVID-19; environmental, social, and governance risk; and activist shareholders are forcing many executives to reckon with long-term impacts on strategy.

Policy matters: As administrations pursue and implement new tax policies, it can have an enormous impact on how—and how fast—companies can use tax equity for capital outlays.

More than profit and loss: Focusing on capital allocation means ensuring that the organization can keep creating value as it changes within its charter and shareholders’ expectations.

Competitive advantage: An effective strategy can narrow the gap between what a portfolio could deliver and what it actually does deliver.