The benefits of budgeting
A Zurich case study

Page 1: Introduction

Zurich Insurance Group is a leading global provider of insurance services. Zurich’s mission is to help customers understand and protect themselves from risk. The company employs 60,000 staff and serves customers in 170 countries around the world. Zurich offers General Insurance and Life Insurance products, for example: General Insurance: car insurance, home buildings and contents...
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Page 2: What is a budget?

An organisation must earn enough revenue so that after all costs have been subtracted, there is a profit remaining. One of the most useful financial tools is the budget. A budget is a business plan expressed in financial terms. Budgets can be drawn up for sales, costs or investment spending. A budget will include a degree of prediction of performance whichis usually based on past data, e.g...
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Page 3: Benefits of budgeting

Budgets are a financial representation of an organisation’s strategy. The process of budgeting requires managers to plan ahead, for example, to identify the resources required to meet targets. This is particularly important in the insurance industry due to the complex nature of the products offered. Insurance generally addresses medium- and long-term needs of customers. Decisions taken now...
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Page 4: Challenges of effective budgeting

Suppose sales volume, prices and costs were all projected to rise annually by 10% (incremental budgeting). This would make budgeting easy, but it is highly unlikely. To increase sales may require price reductions and discounts. Successive rises in sales volume might bring economies of scale, but might need investment to expand production in order to meet that demand. Effective budgeting is full of...
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Page 5: Setting and using budgets

Having established the core financial objectives, often referred to as key performance indicators, the strategies to achieve them can be set in one of two main ways. The budgeting process can be: 'top-down' - i.e. set by senior managers and directed downwards, often based on previous results ‘bottom-up’ - i.e. evolving upwards from middle managers, through the use of detailed...
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Page 6: Conclusion

The Zurich brand is associated with trust and reliability. Quality is at the heart of its customer appeal. However, it is also about innovation and being an industry leader, both in its operations and responding quickly to emerging risks and opportunities. This allows Zurich to deliver what matters when it matters. The budgeting process is a source of competitive advantage. Effective budgeting...
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