The office of finance has navigated organizations through one of the most disruptive periods in living memory. Unfortunately for the finance teams directing the front lines of business, there’s no time to take a breather. Teams that fail to facilitate responsiveness in strategic and operational decision-making might find themselves at the mercy of an influx of disruptive external market circumstances.
Earlier this year, Wolters Kluwer conducted a blind study of 1,320 finance and business leaders of private sector enterprises across North America, Europe, and Asia-Pacific. The research showed most finance and business leaders are taking three significant steps to safeguard their businesses in anticipation of disruption.
1. Breaking Down Barriers Between Finance and Operations
Barriers between finance and operations isolate departments from insights that result in sound long-term decision-making. The research revealed that data and departmental silos obstruct finance and business processes. They effectively caged off holistic cross-functional insights. Nearly half the leaders experienced disconnects between systems, tech, finance, and operations. They also expressed the steep costs of those divides, which included poor data integrity and lack of insight sharing.
While disconnects in decision-making processes are rampant now, leaders won’t tolerate them in the future. The survey painted an optimistic picture of near-term financial and operational alignment. Most finance and business leaders indicated they’d be taking immediate steps to bridge tech, process, and data gaps. A total of 74% intend on reviewing financial and operational planning processes and tools in the next year, with almost half revealing they will update their processes in the next six months.
The process prioritized for transformation is supply chain planning. Sixty-three percent of leaders singled out supply chain planning (including demand, inventory, supply, production, and sales and operations planning) as the operational process that would most benefit from integration with financial planning. I’m not surprised by this result, given that the last three years have shown how fragile global supply chains are to market events.
2. Implementing Extended Planning and Analysis Enterprise-Wide
Extended planning and analysis (xP&A) is a planning methodology that extends FP&A capabilities to other areas of an enterprise, including operations, supply chain, production, sales, marketing, and human resources. It promises to give finance the edge needed to become more agile by linking strategic, financial, and operational plans in real-time. If there were an antidote to disruption, uncertainty, and rapid change, it would be agility.
The overwhelming majority of the leaders surveyed believed the agility that xP&A inspires has the potential to transform finance teams over the next five years. They also indicated implementing this approach is high on their priority list.
Our research found that a move towards xP&A is either underway or in companies' three-year plans. The survey found 70% of leaders plan on implementing xP&A within one to three years. One-quarter of respondents are already in the process of implementing xP&A.
3. Modernizing Dated Technology
The next black swan event isn’t a question of if but when. When asked how important it is for finance to anticipate disruption and provide insights to steer the business compared with two years ago, 95% of respondents said it was more important now. Our research shows leaders act on this urgency, with 83% acknowledging organizations can only be ready for disruption by having the best planning approach and tools.
Most leaders, though, are using outdated tech — if any. Over half of the respondents rely on manual spreadsheets and have no financial close, corporate performance management, or business intelligence tools. Eighty-three percent said their technology and tools need to be more sophisticated to respond effectively to new market opportunities and threats.
Leaders indicated they would allocate funds to the technology budget to prepare for the future. The first tech investments will go towards automating financial processes, workflow, and advanced predictive analytics, underpinned by artificial intelligence and machine learning — all critical tools for fostering agility.
By armoring up businesses with financial and operational alignment, extended planning and analysis, and a modernized tech stack, finance and business leaders will be better positioned to re-align cross-functional plans, respond with financial outcomes in mind, and turn disruption into opportunity.
Alessio Lolli is vice president of global new client engagements for CCH Tagetik at Wolters Kluwer.