The VS component defines how added value is shared between the enterprise, financial and human capital.
When the enterprise performs at or above the CEP, added value is first distributed as per the CEP, and any excess is allocated to human capital, financial capital and reserves in pre-agreed proportions.
If the Enterprise performs below plan, however without reaching a pre-defined Alert level, Management is in charge of implementing relevant improvement measures.
Should the Enterprise break the Alert level, Governance takes charge for a revision of the CEP, and as the case maybe the implementation of measures provided for in a pre-agreed Downside Management Mechanism.
In certain circumstances, Value Sharing and Downside Management Mechanisms are funded through a regeneration of the Capital Structure, rather than solely from the use of the Enterprise own generated resources. In such a case the associated net capital inflow is used to distribute part of the Enterprise Value created to human and Financial Capital. In a turnaround situation, it is used to fund the turnaround plan. See Capital Structure module.