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The Resource for the Global Finance Profession

Today’s Most Important FP&A Challenge: Supporting Innovation

  • By Nilly Essaides
  • Published: 2014-05-19

Volatility of demand remains the number one factor driving strategy at many organizations, according to a new survey. The 2014 Key Issues survey by The Hackett Group also found that risks related to competition, regulation and talent are gaining momentum and affecting the role of finance and general and of financial planning and analysis (FP&A) groups in particular.

The top objective of study participants was creating shareholder value through revenue growth and margin improvement. One of the key strategies companies are adopting to maintain their growth rate is sustainable development through innovation. “Traditionally innovation was usually associated with growth acceleration strategies,” the survey reported. “Today it is a prerequisite to simply maintaining growth rates, staying competitive and ultimately staying commercially viable.”

This focus on innovation is posing new challenges for FP&A organizations. “EPM (Enterprise Performance Management) and BI (Business Intelligence) are critically important organizational competencies top develop and execute an innovations-based growth agenda,” according to the study. “For many this will demand the reinvention of their own service offering and decision support capability.”

The top three strategies for altering the delivery model include retooling through technology, managing cost and realigning talent. “With innovation now prominent on the enterprise agenda, FP&A has gained yet another reason to rethink its value proposition,” the report concluded.

According to The Hackett Group, the FP&A transformation agenda revolves around three key themes: 

  • Integrating EPM processes and developing business partnerships. FP&A is the core of EPM capability in the enterprise. “The maturity of EPM as a decision-making competency is a function of integration between planning domains and the maturity of partnerships between FP&A and the business,” the study authors wrote.
  • Improving core processes to recalibrate FP&A’s value proposition. With FP&A leading the company’s financial management control cycle (financial planning and budgeting, forecasting and performance reporting, supported by analytics), it requires continuous improvement to reduce cost and efficiency gains, so it’s better able to provide support in a flatter organizational structure. “Further, providing better value to the enterprise will rely on FP&A groups’ ability to better integrate and garner business operational knowledge to take their insights to the next level.”
  • Developing business intelligence capability. Finally, FP&A is at the center of the BI revolution. Its analytics skills best position it to kick starting BI initiatives and bridging the gap between financial analytics and the operations.

These three themes are reflected in the study’s data on EPM priorities. The number one priority for FP&A is improving the integration of financial planning and the operations, followed by transforming the reporting processes and the forecasting processes.

“The demand emanating from changes in the external business environment, business strategies focused on innovation and the information revolution puts tremendous pressure on FP&A organizations for reinventions,” the study concluded. FP&A groups that remains “stuck” in merely facilitating the annual budget process are missing out on valuable opportunities to support enterprise performance.

“To avoid this fate,” the authors write, “FP&A organizations must pursue a very broad transformation agenda, simultaneously making core FP&A processes more efficient, developing new BI and analytics capabilities, integrating financial planning processes with the operational and strategic planning domains, and building partnerships with the business.”

Copyright © 2015 Association for Financial Professionals, Inc.
All rights reserved.

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