"High levels of uncertainty in the UK and global markets make planning for the future increasingly complex but more vital than ever"
We spoke to Simon Bittlestone, CEO of financial analytics firm Metapraxis, about how businesses can safeguard their performance with Brexit on the horizon and why planning for strategic goals is more vital than ever.
FR: Why is it more important than ever for management teams to properly and effectively plan for their strategic goals?
High levels of uncertainty in the UK and global markets make planning for the future increasingly complex but more vital than ever. Planning and running sensitivity analysis based on different outcomes gives management the ability to adapt quickly.
FR: Why do finance teams fall into the trap of setting goals from the top, while the rest of the business responds with plans from the bottom - and what problems does this create?
By their nature, finance teams are generally closer aligned to the achievement of financial and strategic goals of the business than the operating planning and delivery. Whilst the best finance teams partner with the business to understand both of these competing dynamics, it doesn’t always work out that way. This creates a problem where the business is left with a plan that hits the strategic goals but is not operationally achievable.
Finance must partner with the business to understand the operational dynamics and open the discussion between different business functions, particularly sales, operations, and strategy, to decide what is achievable in the context of hitting the strategic goals. Using financial planning technology will enable finance to run top-down and bottom-up planning processes repeatedly and quickly, making it easier to close the gap between these two, often competing, positions.
FR: How can businesses safeguard their performance with Brexit on the horizon?
Dealing with risk is part of running any business and CFOs don’t need to resign themselves to inaction when uncertainty arises. Whilst we now have more certainty than before, Brexit is still throwing up so many unanswered questions, so CFOs need more confidence in the insight provided to them and conviction in their decision-making than ever before. This requires a holistic understanding of the business as it is, as well as of the possible outcomes of different courses of action. In times of greater uncertainty, the annual planning process is not dynamic enough. Plans and forecasts should be assessed and refined on a rolling basis throughout the financial year as new factors come into play to ensure that the business remains on track.
FR: How does scenario modelling and financial analytics allow for rolling plans and businesses to be more agile in their approach to financial planning?
Finance teams must constantly look ahead and identify the early warning signs of issues and market changes in order to give management time to act. Analytics allows businesses to focus on the drivers of value, accurately trend likely future performance and isolate exceptions, turning points and corrective action quickly to improve decision making.
This can be further augmented with the ability to run ‘what-if’ scenarios, modelling out the possible outcomes of hypothetical situations to establish the potential impact of them. This can be done for both internal business structure changes and external driver-based events, providing invaluable insights that can be used to inform better strategic decisions. What’s more, thanks to advances in technology, scenario modelling can take place in real-time in the boardroom, providing a competitive advantage for those companies choosing to adopt it. In short, it is extremely powerful.
FR: If you could read one headline about financial services in 2020, what would it be?
If I had to guess, it would be the real-world impact of Blockchain on security and speed of transaction in one of the various financial services markets with multiple distrusted parties, probably insurance. It's been long enough in development and has to happen soon.