These uncertain times demand increasingly agile and analytical Financial Planning & Analysis. How do we build FP&A teams that succeed in the world of ‘unknown of unknowns’?

The CFO at Swiss Railway Freight Logistics (SBB Cargo AG) shares how his own company successfully implemented this agile alternative to traditional budgeting

Organizational agility often faces a considerable barrier: unaligned top-down and bottom-up planning processes. Why does this gap exist? How can we bridge it, and what role does technology play?

As organisations confront a more dynamic world, the traditional budgeting process is increasingly criticised as obsolete. But what if your business is still not ready to abandon traditional budgeting completely?

Corporate Performance Management (CPM) has long consisted in breaking the company’s strategy down into operational objectives and indicators, measuring the achievement of these objectives against operational entities' budget or forecast and take action on that basis. This approach was effective in a stable business environment, with slow and controlled changes.

Achieving flexibility requires a fundamental rethinking of all traditional planning techniques, methods and processes. The ability to forecast and plan continuously and flexibly stands high on the corporate agenda.

How can we create an FP&A eco-system that supports that speed and flexibility? 

The financial planning and analysis (FP&A) storyteller has emerged as one of the five critical roles within the FP&A function. In a data-driven world, the volume of data that exists is exponentially increasing. Equally, the time available for managers to process insights from this data is decreasing. Therefore, the requirement that these insights be taken and used to drive leadership decisions has never been greater.

To bring some perspective to this position of AI within the context of FP&A activities, the FP&A Trends Group recently conducted research examining how artificial intelligence (AI) and machine learning (ML) were being used within the profession. They carried out interviews with thought leaders and academic professionals and examined case studies of organizations that were using AI and ML successfully.

This paper is a result of that research, looking specifically at how, when combined with human intelligence, AI can transform the role of FP&A.

The New Normal means that planning is no longer an extrapolation of the past. Similarly, business drivers that worked last year may no longer be relevant for the future. The reality is that organizations face multiple possible futures. Each one can be triggered by a crisis or an unforeseen event that will require the company to adjust or even change course.

So how should FP&A adapt to this New Normal?

Today’s uncertain times mean that it is no longer good enough for organizations to have one fixed plan and forecast. Historic data by itself cannot help predict the future, nor can classical planning methods and standard variance analysis provide sufficient information to manage a business. It is time to change and adopt a fact-based mindset towards business decisions.