There seems to be a steadily dawning realisation that the crisis in which we find ourselves is here for the long term. Businesses need to move past the firefighting stage and step into strategic planning for the future.

Your finance function has a lot on its plate right now. From focusing on high-level strategic objectives and exploring projected economic scenarios to working on cost-saving targets, resource-reallocation targets and financial plans, they face a complex task.

How has it been achieved so far?

Organisations have had to rapidly adapt their position and introduce faster decision-making processes to adjust to the disruptions they face. Finance teams have been required to make quick decisions to try and keep things on course with a focus on a range of options and agile reinvestment.

This method of working isn’t going anywhere anytime soon. Even assuming that widespread vaccination is the answer to being able to return to ‘normal’, we’re still a long way from reaching that milestone.

To facilitate changes in daily business operations, finance teams have had to link operational KPIs with wider strategic plans and provide real-time data about the impact of changing conditions on their organisations.

What about the budget?

Budgets were traditionally the basis for business unit performance targets, with employees’ incentives linked to meeting certain financial goals. It’s arguable that, under current economic uncertainties, this traditional approach may be counterproductive. As situations changes, financial drivers may also shift, requiring different KPIs.

The monthly business-cycle review – looking back at what has happened so far – is an onerous task with days spent each month gathering, consolidating and presenting the information. It can also generate more questions than it answers. In many organisations, this process has now been replaced by cross-functional ‘war rooms’, acting on real-time performance figures and working through ‘what-if’ scenarios to drive decision making.

Scenario planning on multiple timeframes

McKinsey have outlined an approach suggesting scenario planning across five distinct timeframes. These range from this week (the current situation); through the next 2–4 weeks; the next 1–2 quarters; the next 1–2 years; and then finally to the next ‘normal’. They recommend that against this framework, you ought to have a dedicated planning team working through the following:

  1. Gain a realistic view of your starting position.
  2. Develop scenarios for multiple versions of your future.
  3. Establish your position and broad direction of travel.
  4. Determine actions and strategic moves that are robust across scenarios.
  5. Set trigger points that drive your organisation to act at the right time.

Speed is of the essence

The crucial factor in this approach is speed. Having a rigid plan in place will not work as it will almost certainly become outdated virtually as soon as it’s committed to paper. Instead, your planning team must establish a range of strategic actions which can be put in place in the near future depending on the state of the evolving situation. Being primed to act quickly relies on an agility to iterate and real-time access to all of the required information.

In this time of crisis and uncertainty, the next weeks and months are going to shape the future of your company. Your job isn’t to know the unknowable, but you do need to be the first to know once it emerges and be the first to act. This isn’t going to be a possibility if you haven’t equipped your team with the tools they need to provide the answers you require in real time.

IBM’s Planning Analytics Digital offering has opened access up to enterprises of all sizes – you don’t have to be held back by your existing spreadsheet-based system. Get in touch today to discover how much speed you could gain from using Planning Analytics.

The great thing about working with Spitfire Analytics is their financial background.  We can just explain what we need in our own terms and they understand exactly what needs to be done.

- Phil Talbot, Finance Director, Robertson Group

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