Finance Transformation: From History Keepers to Future Story Tellers: Part 2

Written by Peter Chisambara

business-partnering

flickr.com / Charles Antonio

Part 1 of this article discussed the impact on finance and accounting professionals working in a VUCA (volatile, unstable, complex, unstable) economic environment, in terms of their ability to be able to provide timely, meaningful decision making information. It also highlighted the limitations based on a ‘rules based’ thinking mindset and an over-reliance on collecting vast amounts of data for finding a ‘killer recipe for success’.

There is value in data when the right type and amount of data is collected, correctly stored, properly analyzed and insights gathered to inform strategic decision-making. By acquiring new analytical skills, finance professionals will be able to mine and analyze large data sets, bring out a story out of this analysis, provide an explanation of what has happened, what is driving the numbers, and how they affect the future.

If finance is to succeed in this storytelling role, the function has to definitely move from away from the practice of providing one view of the future. It is embarrassing, to say the least, that in today’s ambiguous and continually changing environment, some organizations are still relying on the annual budgeting process to manage and monitor performance.  The annual budget is static and cannot be relied upon. Using rolling forecasts and scenario planning can help the finance function overcome this problem. Finance ought to gain complete visibility into the performance of the business, be a problem solver and provide solutions to these questions:

  1. What happened?
  2. Why did it happen?
  3. What is going to happen?
  4. What should we do about it?

In other words, finance must be able to anticipate alternative performance scenarios by performing what-if-analysis, identify the triggers of each scenario, evaluate the business impact of each scenario and execute a contingency plan. Performing this exercise will help identify new business opportunities and the ways the business can profit from them, as well as weigh the potential risks and their financial,  operational and strategic implications.

There is nothing wrong in looking at history, since history also provides a platform for learning and a baseline for planning.  Although it is difficult to predict the future with certainty, decision makers cannot afford to run the business by ignoring future risks. Naturally, most finance professionals are risk averse and have a low appetite for risk. The problem with looking at only the downside of risk is that the business is bound to miss on strategic investment opportunities.

Finance professionals need to increase their appetite for risk, at the same time ensure this is not detrimental to the successful running of the business.  Instead of saying no most of the time, finance professionals have to embrace strategic risk taking and evaluate what opportunities are bound to be missed if the organization fails to align its risk and business strategies.

Having finance professionals who are storytellers requires a different talent acquisition and retention strategy. As most routine accounting operations continue to get automated, the organization needs to map out its current skills, document future finance skills need and identify the gap, design an effective talent strategy and execute on the plan. Also, the organization must strive to build a team around people with diverse backgrounds. For example, including people with social and behavioural skills can help the organization model changes in customer and competitor behaviour and describe the financial implications.

Is your finance organization doing enough to help you navigate through this VUCA environment?

 

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