The FP&A Trends Webinar: Digitised FP&A Business Partnering: The Formula for Success
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The FP&A Trends Webinar: Digitised FP&A Business Partnering: The Formula for Success
Click here to view details and register
By Aastha Mehta, Finance Professional
A Global FP&A Trends Webinar that was held on the 10th November 2020 focused on why predictive planning is so important, especially in the uncertain times that we are living in.
This article summarises this insightful meeting filled with practical presentations, interactive polling questions and compelling discussions on the below topics:
Larysa Melnychuk set the tone of the session by demonstrating the uncertainty cone, depicting the current unpredictable environment where the span of predictability is on a decline. This means we cannot afford to have only one scenario and need predictive planning to understand the risk and the opportunities.
Predictive planning is a decision-making platform which involves extensive use of data, statistical and quantitative analysis, to develop predictive models which in turn facilitate fact-based decisions and actions.
The three pillars below represent the concept of Driver based planning:
The framework represents the three stages of the maturity model as per below:
Based on Rex Gu’s, CFO at Maersk, presentation
Historically the role of FP&A was restricted to maintaining accounts to keep the business running, but with the help of evolving technology finance professional is expected to provide predictive and prescriptive insights to business partnering by leveraging digital toolkit and exerting financial acumen.
There are three emerging roles in the FP&A landscape:
By using digitised decision-making framework, the FP&A team at Maersk successfully created various scenarios for each possible outcome in terms of price and customer impact. This allowed them to crystallise the decision-making process by pairing cost consciousness and non-financial factors. As a result, the company was able to reduce its costs significantly.
The FP&A team were able to evaluate contracts, with the help of a toolkit and identify patterns for negotiation and strategize the benefits by applying advanced analytics to win contracts.
How are FP&A roles emerging in other organisations?
Majority of the FP&A Board members agreed that they do not have the three above-mentioned roles but see some of them emerging in the next one year. Few respondents said that it was not possible to have such kind of roles in their organisations.
Based on Gordon Stuart’s, CFO at Unit4, presentation
Some organisations have partially driver-based model and some of them have fully driver-based models.
Our approach towards businesses has completely changed due to the present times. This has impacted the way we plan and also placed emphasis on the fact that we need to be flexible, adaptable along with having a learning mindset to navigate through uncertainty.
There are five problems with high uncertainty:
Before defining the drivers, organizations need to consider the below questions:
One should have a good understanding of the business, in order to be able to define the drivers appropriately. The drivers should be exhaustive, mutually exclusive and should focus on a discreet part of the business in order to make an impact.
Drivers can be categorised into three levels depending on whether they are generic, business-specific or operation-specific:
FP&A needs to be aware of the importance of developing fire drill, which essentially means being prepared to combat a tough situation knowing how to react quickly and not when something happens. Driver based planning helps to understand the key drivers which enables the businesses to sail through crisis.
FP&A Paradigm shift
The comparison from the previous year to the current year as per below shows a gradual shift from traditional to digital FP&A with the help of a predictive model that drives advantages into the business. The FP&A teams have also moved from a historic role in helping the business in identifying what happens next.
The next polling question revealed some interesting insights. Almost 68% of organisations agreed to have some predictive elements in their process, while only 4% of the organisations agreed to have fully implemented digital FP&A using predictive analysis.
Based on Rohan Liyanage’s, CFO Pacific at Signify, presentation
Digital FP&A which entails optimising the power of analytics into foresight and focussing on what can be done.
To get to Digital FP&A, organizations need to take several steps:
Predictive planning can be used to develop a forecast based on drivers which is flexible with real-time changes in which FP&A teams acts as an enabler. This process is fast and effective, unlike the descriptive process which is long and involves high efforts.
To start the process towards predictive planning, organizations need to consider the following steps:
At the end of the meeting, all the speakers shared their takeaways from the session. The panellists agreed that the driver model needs to be integrated across all business functions and the use of integrated models greatly facilitates the speed of response to driver changes in this dynamic environment.
We are very grateful to our sponsor Unit4 for their support.
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