Nilly Essaides, Director & Practice Lead, Fnancial Planning & Analysis, AFP
Happy New Year, FP&A professionals! Your role next year will only become more critical and challenging as the external environment grows more uncertain, financial volatility increases and the markets become even more competitive, disrupted by new technologies, new business models and the digitization of the economy. According to AFP’s FP&A Advisory Council, a group of 36 leading financial planning and analysis (FP&A) professionals and experts from all over the world, the top three challenges this coming year will include:
“Going into 2016, increasing our forecasting agility is a key driver of the work of the corporate FP&A department,” said Tom Russell, director of corporate FP&A for Welltower. “Our business is moving at an ever-increasing pace, with more challenging acquisitions along the dimensions of size, geography and complexity, especially with multiple joint venture partners on a single transaction. The ability to incorporate all of those moving pieces to produce a real-time forecast of the company’s performance creates challenges, as well as opportunities for our forecasting efforts.”
Emma Martin, the CFO of Ogilvy in Singapore, noted that not long ago, ‘under-promise, over-deliver’ was a common catchphrase for many finance departments. “As long as you came in above your promises, everyone was happy,” she said. “These days, that phrase has changed to ‘no surprises’, up or down, i.e., the ability for us to accurately forecast our monthly results has become increasingly important. That means finance needs not only to forecast well, but the data available to constantly track against that forecast and flex the elements as the year goes on.”
For FP&A, according to Philip Peck, vice president, finance transformation at Peloton Group, the challenges are:
- Streamlining and optimizing the forecasting process to reduce cycle times, enhance agility and flexibility, and improve the company’s ability to proactively address changing market conditions
- Driving greater ownership and accountability for key operational business drivers
- Establishing a driver-based, rolling forecast process.
According to Øyvind Strand, business domain responsible for finance, HR and CRM, Business Intelligence Competency Centre at European multinational DNV GL, another key challenge is understanding how to use analytical/cognitive tools to automate and increase efficiency. The goal is to ensure that FP&A spends less time on reconciliation of financial performance data and more time on analysis, “so we can change perception of traditional views/understandings painted by the gut feeling.”
Data analytics is becoming a hotter and hotter topic in the business world, according to D.J. Masson, PhD, CTP and Associate Clinical Professor of Finance at the Kelley School of Business at Indiana University. In that regard, FP&A will have to find its role relative to this development and how it can help organizations to deal with the data overload.
According to Peck, the challenges for FP&A are:
- Incorporating more advanced analytics into regular planning and decision-making activities
- Leveraging business acumen to identify opportunities where analytics can drive performance
- Harnessing big data and more advanced and accessible modeling techniques.
Finding the right talent
One big challenge, according to Strand, is figuring out “how to combine a high competence workforce with the new era of being data smart by seeing digitalization as a main part of our business strategy going forward. Harnessing advanced analytics tools would definitely raise finance departments’ capability of generating more accurate and reliable forecasts and thus bringing more value in the decision-making process.”
According to Rachel Yau, head of finance ASEAN at Boston Scientific, good FP&A professionals are very limited in the market. “As the demand for these professionals increases, companies are snatching talents from one other instead of developing in-house,” she said. Yau already sees talent retention as a huge challenge currently, “and I foresee it will worsen next year.”
And it’s not just other companies’ FP&A teams that are competing for the same talent. There’s also growing competition from business line analytical teams who work in their own silos but have quite advanced skills in database querying, statistics, data mining and other similar fields.
According to practitioners and experts, the challenges for FP&A are:
- Attracting top talent in the face of competition from other companies and even within their own organizations
- Finding professionals who can bring both analytics and soft skills to the table, so that they’re able to participate in conversations with business leaders and tell effective stories based on their analysis.
- Figuring out the best approach for developing the full array skills needed for FP&A practitioners to become indispensable business partners.
This coming year, and in years to come, the expanding role of FP&A as an advisor to the CFO and a key player in the strategic planning process will place increasing demands on its forecasting processes, its ability to analyze and extract insights from big data, and the kind of talent it needs to hire in a competitive market. These are tall challenges. But most FP&A professionals are excited, not overwhelmed, by what lays ahead. They are eager to improve their skillsets and up their bench strength to support more valuable, data-based insights that can drive improved enterprise performance.