Who is responsible for the €500 million decision?

Governance begins where multiple perspectives must converge to form a joint capital decision.

BOARDROOM QUESTIONS
The questions your portfolio should be able to answer.

€500 million CAPEX.

200 investment projects.

Multiple business units.

Several countries.

Several strategic objectives.

A limited budget.

Who decides?

The CEO?

The CFO?

The business units?

Controlling?

Strategy?

Operations?

The Investment Committee?

The Executive Board?

Or the Supervisory Board?

In many companies, the answer is:

All of them, in a way.

And this is precisely where one of the greatest challenges of complex capital allocation lies.

Many have a say in the decision

The CEO knows the strategic direction.

The CFO knows about financing, liquidity and capital limits.

The COO is aware of operational bottlenecks and resources.

The business units are familiar with markets, customers and their projects.

Controlling is familiar with business cases, budgets and key performance indicators.

Strategy is aware of long-term priorities.

Risk is aware of risks.

The Investment Committee assesses the proposals.

The Executive Board bears overall responsibility for the decision.

Everyone has access to relevant information.

But no one should focus solely on optimising their own specific area.

500 million euros is not simply the sum of individual project decisions

This is precisely where a common misunderstanding arises.

Project A is under review.

Project B is under review.

Project C is under review.

Each business case is assessed individually.

Each business unit defends its investments.

Each department has its own priorities.

In the end

,

the approved projects are consolidated.

But a portfolio is more than the sum of approved individual projects.

The real decision is not just which project is approved.

The real decision is which combination of all projects should receive the available capital.

Who has the big picture?

That is the governance question behind capital allocation.

If Business Unit A optimises its projects, it may well be acting entirely rationally.

If Business Unit B does the same, so too.

If Operations protects its capacities, that is also understandable.

If Finance prioritises liquidity, it is fulfilling its role.

And when Strategy calls for long-term growth projects, that too can be the right approach.

The problem only arises at corporate level.

Local rationality does not automatically result in an optimal overall portfolio.

The company needs a Decision Architecture

Decision Architecture does not mean introducing yet another decision-making body.

It means clearly defining how a complex decision is structured.

What are the objectives?

What criteria are used?

What data is required?

Which constraints are binding?

What assumptions apply?

Who is authorised to change assumptions?

Who provides what information?

Who evaluates the results?

Who has which decision-making powers?

And who ultimately makes the decision?

Governance does not merely define who decides.

Governance also defines how the basis for decision-making is established.

The first level: objectives

What is to be achieved with the 500 million euros?

Maximum expected economic value?

Growth?

Cash flow?

Productivity?

Resilience?

Digitalisation?

Transformation?

Or a defined combination of different objectives?

The algorithm cannot answer this question.

It is a matter for corporate management.

The second level: criteria

How are the objectives operationalised?

Which criteria are used for projects?

NPV?

Cash flow?

ROI?

Risk?

Strategic relevance?

Productivity?

Resilience?

Any other quantifiable criteria?

And how are these criteria handled within the decision-making logic?

Anything that is not defined cannot be consistently factored into the calculation.

The third level: Constraints

500 million euros is already a constraint.

But it is not usually the only one.

Engineering capacity.

Production resources.

IT resources.

Liquidity

limits.

Project dependencies.

Mandatory

projects.

Timeframes.

Regional conditions.

Other operational or financial constraints.

A realistic portfolio can only be created once the company’s relevant constraints have been taken into account in the decision-making model.

The fourth level: decision-making authority

Now comes the actual governance question.

Who is authorised to amend the budget?

Who is authorised to change strategic weightings?

Who defines minimum requirements?

Who validates project data?

Who is authorised to mark a project as mandatory?

Who decides on exceptions?

Who approves the final project combination?

A mathematical model does not eliminate governance.

It makes good governance even more important.

Rubbish in. Optimised rubbish out.

Mathematical optimisation can be very powerful.

But it has a clear limitation.

If assumptions are wrong, they remain wrong.

If project data is incomplete, the calculation cannot magically fill this gap.

If strategic criteria are defined in a contradictory manner, the contradiction will not result in a corporate strategy.

If constraints are missing, the calculated portfolio may be operationally unrealistic.

The quality of the decision therefore does not depend solely on the algorithm.

It also depends on the quality of the decision architecture.

Who holds the truth about a project?

This question, too, is more difficult than it sounds.

The project manager knows the operational reality.

Finance knows the financial assumptions.

Controlling checks for consistency.

Strategy assesses strategic relevance.

Operations is aware of resource conflicts.

Risk knows the risk factors.

No one necessarily possesses the whole truth on their own.

That

is

why governance should also define who is responsible for which data and assumptions.

The decision requires a common language

Business units talk about projects.

Finance talks about capital.

Controlling talks about key performance indicators.

Strategy talks about priorities.

Operations talks about resources.

Risk talks about uncertainty.

The board must make a decision based on this.

A shared decision architecture combines these perspectives into a consistent decision-making model.

PROJECTS → VALUE → STRATEGY → CONSTRAINTS → PORTFOLIO → DECISION.

The loudest business unit should not automatically win

Capital allocation is also an organisational process.

Business units differ in size.

In influence.

In management attention.

In presentation skills.

In historical significance.

In proximity to the Executive Board.

This does not mean that investment decisions are fundamentally made for political reasons.

But human organisations have different interests and perspectives.

An explicit decision-making logic creates a common quantitative framework on which projects can be compared.

Mathematics has no business unit

An optimisation model recognises no powerful business division.

It recognises no persuasive presentation.

It recognises no hierarchy.

It has no favourite projects.

It only recognises the data, objectives and constraints it is given.

That is

precisely why governance beforehand is so crucial.

Neutrality in the calculation requires clarity in the modelling.

The algorithm does not make the decision

That, too, must be unambiguous.

A mathematical optimum within a model does not constitute an automatic management decision.

The model merely maps out the defined decision space.

It is aware of the objectives, data, assumptions and constraints that have been provided to it.

It does not automatically know every qualitative aspect of the company’s reality.

Therefore, the following applies::

The algorithm performs the calculations.

Management evaluates.

The responsible body decides.

Governance also means traceability

Why was Project A funded?

Why was Project B not funded?

What was the budget limit?

What strategic criteria were used?

Which resources were in short supply?

Which dependencies were taken into account?

What assumptions underpin the calculation?

Which alternative was considered?

Good decision architecture should make these questions transparent.

From ‘Who made the decision?’ to ‘How was the decision reached?’

That is an important distinction.

Governance does not end with a signature or a resolution.

For complex capital decisions, the decision-making process is also relevant.

What information was available?

Which scenarios were examined?

What trade-offs were apparent?

What constraints applied?

Which alternatives were compared?

The quality of governance is also reflected in the quality and transparency of the decision-making process.

Now the CEO is changing an assumption

500 million euros in CAPEX.

200 projects.

The portfolio is available.

The CEO says:

“Growth is being given higher priority.”

Who is authorised to approve this change to the model?

How is it documented?

Which other weightings are changing?

What are the consequences?

The portfolio is recalculated.

The CFO says:

“Minimum liquidity must increase by 50 million euros

New constraint.

New calculation.

The COO says:

“This resource will not be fully available next year.”

constraint.

New calculation.

The calculation can be done in real time.

Governance must therefore not be neglected.

Live Boardroom Simulation requires clear roles

The faster scenarios can be calculated, the more important the separation between input, calculation and decision-making becomes.

Management: defines strategic direction and priorities.

Finance: defines and validates financial parameters.

Controlling: ensures data logic, comparability and transparency.

Operations: validates operational constraints and resources.

Business Units: provide project information and operational assumptions.

Decision Model: calculates the permissible portfolio alternatives within the defined logic.

The Executive Board or relevant decision-making body: makes the decision.

The specific allocation of roles depends on the governance structure of the respective company.

But the principle remains:

Calculation is not authorisation.

Decision Architecture makes speed manageable

If a portfolio recalculation takes only a short time, many scenarios can be generated during a single session.

That is powerful.

But without clear decision-making logic, speed can also raise new questions.

Which version is binding?

Which assumption has been changed?

Who changed it?

Which version was approved?

Which projects are included in the final portfolio?

Decision Velocity requires Decision Governance.

The four levels of a CAPEX Decision Architecture

. STRATEGIC INTENT

What does the company aim to achieve?

. DECISION LOGIC

How are objectives, criteria, data and constraints translated into a consistent decision logic?

3. MATHEMATICAL OPTIMISATION

Which combination of projects produces the optimal result within this defined model?

. MANAGEMENT DECISION

Which alternative is actually chosen following an assessment of all relevant quantitative and qualitative factors?

Strategy → Decision logic → Calculation → Management decision.

StratePlan: A shared mathematical decision space

StratePlan can integrate projects, economic targets, strategic criteria, budgets, resources, dependencies and other quantifiable constraints into a single decision model.

This enables different management assumptions to be calculated as scenarios and their impacts on the portfolio to be compared with one another.

However, StratePlan defines neither the corporate strategy nor the governance.

Nor does it determine who within a company has decision-making authority.

The company defines the rules.

StratePlan performs calculations within these rules.

The relevant management or governance body makes the decision.

Who Owns the €500 Million Decision?

The CEO holds part of the answer.

The CFO holds part of it.

Controlling holds part of the answer.

Operations holds part of the answer.

Strategy holds part of the answer.

The business units hold part of the answer.

But 500 million euros in CAPEX requires an overarching decision.

And this overarching decision requires an architecture.

Clear objectives.

Clear data.

Clear criteria.

Clear constraints.

Clear roles.

Clear decision-making authority.

Transparent alternatives.

The crucial question in the boardroom is therefore not just:

‘Which projects do we fund?’

But rather:

‘How do we ensure that 200 individual interests are transformed into a

transparent

€500 million corporate decision?’

DECISION ARCHITECTURE → OPTIMISATION → GOVERNANCE → DECISION.

The organisation defines the decision-making framework.

Mathematics calculates the alternatives.

The responsible body makes the decision.

DON’T TRUST US. CALCULATE IT.