Finance simulations in corporate trainings: how does that work?
Business strategy games bring valuable hands-on experience to participants in corporate trainings, this is no secret. We asked Damien Jelsch, a training professional with close to 30 years of career in key Finance roles, to walk us through one of his programs incorporating our games in finance.
We asked Damien Jelsch, Leadership and Finance expert
For the past ten years, I have been delivering workshops in the areas of ‘Leading Others’ and ‘Leading Businesses’, working with managers from middle- to top-levels and from various types of organizations – multinationals, family-owned and private equity businesses.
My expertise in Leadership and Finance developed over the last three decades, where I occupied top management roles in various industries – including construction, life sciences, energy and telecoms – and operating in multicultural and multilingual environments.
The programs I design and facilitate are usually built around 4 main pillars: theory; practical exercises; interactive discussions, and experience-sharing.
Integrating the finance simulation into a business finance training
One program I have in mind is ‘Business Finance for non-Financial Managers’, which falls into the ‘Leading Businesses’ category I mentioned earlier. This program was designed for newly appointed managers who need to develop their financial acumen. Participation in this program enables them to grow their ability and confidence to engage with and contribute to financial discussions. Another key outcome is for participants to understand how their decisions influence the financial results of their business.
Using a business simulation as a red thread, the program addresses two main areas:
1) Moving from financial statements to financial analysis, exploring the three key financial statements (income statement, balance sheet, cash flow statement); understanding the concept of operating working capital management, and getting familiar with financial ratios (liquidity, profitability, activity and leverage ratios).
2) Management reporting and decision-making, integrating the concepts of break-even point and contribution margin; learning to use the notions of discount rate, payback period, net present value and internal rate of return for better investment appraisal.
Reasons for using a business simulation game
Fundamentals of Finance, the game in finance developed by MEGA Learning, supports the program content from start to finish: the full integration of the game enables participants to gradually practice their freshly acquired financial knowledge.
By so doing, we create a deeply engaging learning experience – as the different teams of participants compete against one another, they instantly notice the financial impact and viability of their decisions. This way, participants reinforce their understanding and their sense of accountability – they learn to look at the big picture instead of getting lost in the details.
The program gains value by integrating this business strategy game, creating a strong dynamic among team members, who are all focused on winning the first prize.
Concretely, participants receive their financial statements after each decision – the results are generated on the MEGA Learning platform itself.
Based on these, teams will:
1) notice the impact of their decisions on performance – measured by the EBIT,
2) assess the robustness of their company’s financial structure – using the gearing ratio and
3) reflect on their capacity to generate cash or not – using the cash-flow statement.
Furthermore, we dive into operating working capital management through the concepts of Days of Sales Outstanding (DSO) and Days of Purchases Outstanding (DPO), thereby allowing participants to realize the importance of properly negotiating payment terms. For example, the more you extend your suppliers’ payment terms, the higher the simulation will forecast the production costs per unit. Alternatively, asking your customers to reduce the payment terms may indeed lead to a more efficient cash-collection, yet it might cause a loss of some customers, who are sensitive to such changes.
From experience, the winning team is usually that which has a clear strategy and long-term look at their business instead of short-term results. Teams investing heavily on production capacity early on have a bigger chance to win the game, as they will be more flexible to adapt prices, marketing, R&D and quality expenses tactically to beat their competitors.
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You can also find Damien Jelsch's profile here.
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