Entity-Level Business Model

What I have found to be useful is to develop an Entity-Level Business Model based on a standardised framework as the starting point for business modeling.  It is a high-level profile of the Business and the environment in which it operates.  The purpose of gathering information about the business at the entity level is to identify sources of business risk, the entity’s position in the industry  and the key business processes.

The key business processes are classified as those that are considered critical to attaining the business's objectives and are categorised as:

1. Strategic Management Processes
2. Core Business Processes
3. Resource management process

Below is a diagram depicting the high level Entity-Level Business Model.

Each process identified in the Entity-Level Business Model, has the following descriptions:

• Purpose of the process
• Diagram of the process in terms of inputs, outputs, activities and information systems
• Business objectives
• Critical success factors
• Key performance indicators
• Business risks
• Responses to business risks
• Internal control
• Classes of transactions

Approach

1. Gain understanding of what information exists, from the organisation’s own documentation, strategic plans, market analysis, process maps, industry knowledge, and market assessments.
2. Identify the organisations individuals to be involved (e.g. functional managers and process owners).
3. Engage the organisation in interviews that are well-prepared and focused on the elements of the Entity-Level Business Model.
4. Complete the Entity-Level Business Model.
5. Develop a skeleton value chain (Value Chain Analysis).
6. Educate, review and modify results with the organisation.

Templates

Entity Business Model

Business Process Template

Process Objectives

Processes are established to serve specific customer needs. The customers may be internal customers, such as another process, or external customers. The process objective defines what value is going to be supplied to the customer. One can look at it as the whole purpose for which the organisation has put together this set of resources and activities. Process objectives need to be specific, measurable, attainable, realistic, and have a sense of time. Most organisations will have fairly similar strategic management processes. However, their core business and resource management processes may differ significantly, as they are shaped by the organization’s strategic objectives and the related critical success factors.

Inputs

The inputs to a process represent the elements, materials, resources, or information needed to complete the activities in the process

Activities

The activities are those actions or sub-processes that together produce the outputs of the process.  For some processes, arrows are omitted due to the non-sequential nature of the activities.

Outputs

The outputs represent the end result of the process—the product, deliverable, information, or resource that is produced.

Systems

The systems are collections of resources designed to accomplish process objectives.  Information systems produce reports containing operational-, financial-, and compliance-related information that make it possible to run and control the process.

Classes of Transactions

The classes of transactions are data and information that are related to the process for use in one or more reports to management or third parties.  The classes of transactions, which are broken down into routine and non-routine transactions and accounting estimates, provide a link from the process to the financial statements of the client.  Every process will have one or more classes of transactions.

Risks That Threaten Objectives

Controls Linked to Risks

Process risks are risks that may threaten the attainment of the processes objectives. Every process has one or more risks threatening the achievement of its objectives.

Controls are the policies and procedures, which may or may not be put in place, that help provide assurance that the risks are reduced to an acceptable level. The controls are implemented to either reduce, transfer, or avoid the risks associated with the process and its objectives. Management may choose to accept the risk; in this case they will not implement any specific controls. This is an acceptable response.

Critical Success Factors (CSFs)

KPIs Linked to CSFs

Critical success factors (CSFs) are the prerequisites and areas of dependency for a process to be successful.  CSFs may be inputs, parallel or supporting activities, or aspects of a business’s philosophy or infrastructure necessary to ensure the proper delivery of the process. The CSFs relate directly to one or more of the processes objectives. They are normally limited in number.

Key performance indicators (KPIs) are quantitative measurements, both financial and non-financial, of the process’s ability to meet its objectives and of the process performance. They are usually analyzed through trend analyses within a company or through benchmarking against a peer of the company or its industry. The KPIs that should be listed must be relevant to the CSFs and/or the process objectives.  The KPIs listed must have relevance to the organization. Taken together they should provide a key set of measures for measuring process performance–achieving process objectives.

Other Symptoms of Poor Performance

Other symptoms of poor performance represent other evidence that may exist and that indicates the process may not be operating to its most effective level.  The items listed here should lead to performance improvement opportunities listed below.

Performance Improvement Opportunities

Performance improvement opportunities are areas for performance or process improvement.  This improvement may be achieved internally by the client or with other third-party assistance.