Decision making requires a formal process to ensure that sound bases are taken into consideration and to ensure accountability and control. It is applicable to the different types of (material) decisions i.e. investments, developments, catalogue or contract pricing, reorganisation, etc. It is more flexible and specific than the forecast methodology (budget, rolling forecast, etc.). 

Why a formal process?

There are decisions that engage the company future and cannot just be managed through the company forecast process and need a more in-depth and specific approach. Furthermore, many of those decisions need proper coordination between different functions. 

A formal process permits then to have a standard way to organise the decision making with a clear set of deliverables and responsibilities. 

Business case is such a tool which help management to determine the value-added and profitability of each material project.

FP&A is a key player in managing this process. Practically, business case is just another type of forecast i.e. a forecast applied to a more specific subject and with different time scales. It then presents the same general characteristics that forecasting (methodology, potential bias, need for internal and external data, analysis and reporting, etc). FP&A shall then ensure that the same level of rigour is applied when preparing business cases.

The key business case characteristics:

• It should precisely describe the decision’s objectives, why it is proposed (response to a threat or opportunity), the resources that would be needed and the expected results/consequences including return on investment.  
• It should involve the different functions that will be part of or influenced by the decision. As such it should enhance inter function cooperation and is logically involving a different level of management depending on materiality levels. 
• Its scope is different from the recurrent forecasting activities (plan, budget, rolling forecast, etc): 
  • It does not try to cover the whole company but only the areas specifically concerned by the decision,
  • Its time length is the one relevant for the decision,
  • It may cover resources that are or are not included in the current applicable forecast. It would be enacted in future forecasts when relevant.
• It permits traceability of decisions, follow up and control. It should be part of the company governance and delegation of authority.

Company governance and delegation of authority are structural components of the company culture. It defines who can/shall decide on what type of actions / responsibilities and up to what level (materiality generally express in money terms but not only). It should be adapted to the company type, size and business. Their purpose is to improve the way of working but like all cultural elements, it can presents and/or generates bias. 

• Too centralised, it will concentrate all decisions to the top-level (M0, M1) and can become a factor of rigidity impacting motivation and reaction time,
• Too distributed it will dilute the decisions to the different level of management (M0, M1, M2, …, Mn). It may be a motivating factor but can also impact company coherence and complicate inter function decisions,
• In between those two extremes, different variants exist (based either purely on management level and/or on type of decisions).

Why use the formal business case process?

The formal business case process will be the tool that put those D.o.A into practice for material decisions such as:

• Material investments out of the business as usual (new or extension of production capabilities, M&A, Information system change, new product developments, …),
• Material commercial decisions (pricing of large contracts, change in catalogue pricing, the opening of new agencies/countries, …),
• Material organisation changes (in/outsourcing, changing organisation structure, …)
• Business as usual decisions involving different functions and/or over a certain value or of a given nature.  

The formal business case process will ensure that the different stakeholders’ inputs, engagements and sign-off are taken into account and that the deliverables are clear (timing, resource allocations, …). The decision will be registered and relevant analysis and reporting be put in place to follow the business case activation. In many cases, this will be through a project structure. Defining standard format(s) and submission process is important, the substance in each business case is essential. 

FP&A professionals shall then be engaged in all those activities as partners to the business i.e. to ensure that the financials of the business case are sound, but also as D.o.A “keepers” i.e. to ensure that the decisions made through the management structure are kept in line with the D.o.A and governance. 

The business case process will challenge (probably even more than the forecast process) their abilities to exercise their influence and support the business by putting them in the operation’s business centre.