NEWS
Data analytics, scenario planning, and the finance department
Published On :
Rob Douglas, VP Sales UK & Ireland, Adaptive Insights
The role of the finance department has slowly but radically evolved in the aftermath of the 2008 recession.With companies now keenly aware of what can go wrong, the traditional tasks of accounting, budgeting, and reporting are no longer the only focus for today’s finance team. With economic uncertainty now a certainty, organisations are increasingly turning to their finance teams—and often to the financial planning & analysis team within finance—for forward-looking and strategic activities such as multiple scenario planning.
The adverse effects of macroeconomic factors are clearly top of mind for CFOs and impact the way they run their teams. Aglobal survey we conducted with CFOs earlier in Q1 2016 found that two-thirds of CFOs are concerned about economic volatility in their region, citing it as the biggest financial risk for their company.[1] The UK’s recent vote for Brexit is a case-in-point that markets can change overnight, requiring a change in today’s corporate planning.
Mapping macroeconomic scenarios
It is the combination of big data, analytics, and scenario planning that will be key for CFOs successfully navigating their organisations in turbulent economic times.The same survey showed that, despite the high levels of concern over economic volatility, 85 percent of CFOs are nevertheless confident in their forecasts...Why?
Should there be a contraction of the market, 48 percent of CFOs believe that scenario planning will provide the most value to their organisations during a downturn. Nearly a third (30%) of CFOs believe that turning real-time data into insight will provide the most value, highlighting CFO reliance on scenario planning and analytics to manage their business.
However, CFOs are not just leveraging analytics to plan for the worst-case-scenario – they are also positively using analytics to take advantage of unseen opportunities. An overwhelming 78 percent of CFOs said that applying financial data analysis to achieve profitability will provide the most strategic value to their organisations in the long run. And with growing reliance on scenario planning, CFOs are not only feeling confident in their forecasting capabilities but also in their use of technology used to model multiple scenarios... Ninety-three percent report they are moderately, very, or extremely proficient in technology.
Technology and the finance department in years to come
As the CFOs’ relationship with data and analytics moves beyond trust to reliance, there will predictably be increase in demand for the technology that can facilitate it.Fifty-six percent of CFOs say that they were likely to invest in dashboards and analytics technologies in the near future – showing a very clear trend of CFOs aiming to increase the scope of their strategic activities.
The cloud has also come onto CFOs’ radars in a big way. Cloud computing is the key to leveraging data analytics, as it vastly increases the amount of data that organisations can store; it is far more flexible than physical infrastructure, making data gathering and analytics easier; and it is host to some of the very best analytics platforms, taking advantage of the benefits of Software-as-a-Service (SaaS).
SaaS is an attractive model for finance, with CFOs citing the increased capability for cross-organisation collaboration as the top reason for implementing SaaS solutions; followed by less reliance on IT; and significant cost savings. In this same survey, CFOs estimate that 33 percent of their IT infrastructure is SaaS-based today and they forecast this to grow to 60 percent of their infrastructure by 2020.
The changing role of the CFO
With the widespread adoption of technology, and increasing emphasis on analytics, the evolution of the CFO’s role is certainly set to continue. While most CFOs (93 percent) see compliance as their top priority today, only 62 percent see this as a priority three years from now. Rather, they expect to begin focusing on talent management (78 percent), transforming financial data into intelligence to drive growth (77 percent), and understanding how to leverage IT to take advantage of evolving market opportunities (74 percent).
Furthermore, CFOs expect their use of technology and big data analytics to become more important in the advancement of their career. Forty-three percent believe big data and analytics will have the single biggest effect on their future role, with technical and analytical skills (65 percent) ranked as the most beneficial attribute to their performance.
All signs suggest that big data and analytics technologies will take pride of place in the finance departments of 2020, with progressive CFOs quick on the adoption of the latest tech to enhance their role and do everything they can to lead their companies to success, no matter the scenario.
[1]http://www.adaptiveinsights.com/newsroom/press/global-survey-reveals-cfos-will-navigate-economic-uncertainty-by-harnessing-the-power
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