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Corporates are sure to have a multitude of questions regarding today’s announcement that AFP is developing the first ever certification for the corporate financial planning and analysis (FP&A) profession. Much like AFP’s successful Certified Treasury Professional TM designation (CTP TM), the FP&A certification will be based upon uniform standards of practice that encompass all facets of the profession.
To get a better sense of how this certification came about and how soon AFP members can expect to see it, we spoke with AFP’s Jeff Glenzer, CTP, Managing Director, and Brian Kalish, Finance Practice Lead.
AFP staff first recognized the need for a FP&A certification after observing a number of corporate practitioners taking on expanded roles to become increasingly involved in the FP&A practice within their organization. At the time, few FP&A resources existed for these professionals. “There wasn’t really an agreement on what the competencies were in the field,” said Glenzer. “This is something that we’d been watching from the fringe for probably six or more years and it just continued to be reinforced.”
A little over a year ago, Glenzer recalled, a former AFP board member and corporate practitioner at a very large Fortune 100 company contacted AFP about potentially conducting a survey of how companies calculate cost of capital, a core FP&A task. The information received through the ensuing 2010 Cost of Capital Survey solidified AFP’s view that there is little consensus on the proper techniques companies use to model and forecast and that there would be value in a FP&A certification to define universal principles and set standards of practice. “The years of observations about how our members’ roles have changed, feedback directly from people about a lack of best practices in FP&A… it really felt very similar to what we did with cash management so many years ago, when that was not really a defined profession with defined standards of practice,” said Glenzer.
Kalish agreed, noting that an FP&A certification could help to define the FP&A profession, in the same way that the CTP serves to define the treasury management profession. “There is a percentage of the job that an FP&A professional performs that can be defined and best practices standardized,” he said. “A certification will permit peers, employers, and potential employers to have a better understanding of the capabilities and abilities of someone with the FP&A certification.”
In the past 12 months, Kalish has spent countless hours making individual calls, interacting with members through social media, and holding small FP&A roundtables around the country, extensively researching the knowledge and education needs of FP&A professionals. “We conducted interviews with FP&A professionals with a wide variety of backgrounds, experiences and geographic diversity,” he said. “We had a wonderful opportunity to follow up with a number of the interviewees at last year’s AFP Annual Conference in Boston where we offered our first-ever FP&A track.”
The response to the 2010 Cost of Capital Survey, the social media groups, the roundtables and other interactions has been unanimously positive. “Given how successful and sought after the CTP is, we asked FP&A professionals if they thought an accreditation was needed and if it would be enthusiastically received. The answer to both questions was an overwhelming ‘Yes! And, where have you been all my career?’” said Kalish.
Glenzer added that AFP has “literally not found one person” that thought a certification to be a bad idea. “The fact that nobody has said that this isn’t needed is really a strong endorsement of the direction we’re taking,” he said.
The FP&A profession, which sits at the intersection of accounting and finance, has grown in stature and size over the past decade. The increase can be partially attributed to the increase in available data, noted Kalish. “The value to transform data into knowledge has never been at a greater premium,” he said. “FP&A professionals are often in the unique position to see, with great clarity, the areas where organizations can produce the greatest ROI.”
More recently, FP&A has surged due to the overwhelming uncertainty in the financial markets and global economy. But with some nations slowly recovering and the financial crisis nearly four years in the rearview mirror, will FP&A maintain its newfound prominence? “I think the challenge with FP&A in an environment like we’re in now is that the risk factors are probably more numerous and the volatility in each of those risk factors is probably elevated,” said Glenzer. “So that’s bringing some attention to it. When we get back to more predictable times, I think it would be a gigantic mistake for people to deemphasize the economic value that financial planning and analysis can add.”
Glenzer and Kalish note that, even in the strongest economic times, poor financial planning and analysis can lead to failed acquisitions and bad strategic investments. But if companies possess discipline—be it in boom times or in downturns—they have a better chance of thriving in the long term and winning market share. “The discipline behind FP&A never loses importance,” said Glenzer.
Simply put, the more data and analysis the organization has, the better chance it has to make good decisions, noted Kalish. “Going forward, I believe the role of the FP&A professional will have an increasingly positive impact on the success of organizations. Those organizations that have the better ability to forecast, plan and analyze should have an easier time negotiating any turbulent times ahead of us,” he said.
The FP&A certification process is still in the development stages, so it is unclear what the precise exam specifications will be, what combination of education and experience will be prerequisite to passing the exam, and whether a textbook similar to the Essentials of Treasury Management for the CTP will be published for the new credential. Glenzer explained that AFP may opt to provide a definition of the body of knowledge and recommend reading sources in lieu of writing an actual volume. “It may lend itself to more of an outline with a recommended reading list rather than just developing it and updating it every three years because the profession is constantly changing and there are certainly established resources out there,” he said.
But while the certification is still a work in progress, the demand for FP&A expertise clearly remains, and AFP is confident that the FP&A certification initiative will receive a huge response when it launches in late 2013/early 2014. Prior to that, AFP is planning a major announcement at the 2012 AFP Annual Conference in Miami this October, along with an even greater track of FP&A conference sessions (seven in 2011), and an FP&A networking reception aimed at engaging members and non-members. AFP also currently offers regular FP&A training courses, and a newsletter that will increase in frequency from quarterly to monthly this March. Launched less than two years ago, FP&A Newsletter already boasts 4,400 subscribers in all 50 states and more than 100 countries.
“Both AFP members and non-AFP members alike have informed us of their desire to see AFP create and support an FP&A certification,” said Kalish. “They look at the 25-year success we have had with the CTP designation (and predecessor credential the Certified Cash Manager [CCM]) and they would like to see the FP&A certification succeed along a similar trajectory.”
To learn more, visit www.afponline.org/FPA/, and contact FP&A@afponline.org if you would like to be included in the next survey phase of the credential’s development.