LONDON -- Last week’s meeting of the London Financial Planning and Analysis (FP&A) Club featured a roundtable discussion of topics at the forefront of the minds of senior FP&A professionals from major multinational corporations—predictive analytics, finding and developing FP&A talent, making numbers across the entire company align and best practice tips on shared service centers (SSCs).
“I’m very interested in how other companies already use predictive analytics as I believe it will come to dominate in the next couple of years,” said Remko Boer, vice president of strategic planning appraisal and reporting, trading and supply at Shell.
James Franklin, FP&A strategic planning manager at Inter Hannover, noted that his company is also very interested in analytics. “As an insurance company, we are very data driven when it comes to predicting the impact of claims,” he said. “We have to combine historic trends with more forward-looking portfolio analysis to manage our overall exposure.”
Franklin cited the fact that whiplash claims add an average 20 percent to everyone’s car insurance in the UK as evidence of the power of mastering data, as this knowledge can potentially allow you to manage these claims better and reduce fraud. “We also use analytics to examine where a hurricane will hit and the impact it will have on different buildings, whether they are made of wood or skyscrapers and so on,” he explained. “This all helps us as insurers and financers, controllers, and so on to tell the story.”
Can we forecast better, using technology? Attendees, which also included Peter Miranda, senior FP&A analyst at the Walt Disney Company and Marc Lloyd of L&G Investment Management, agreed that this is the crucial question for finance professionals interested in using analytics to predict risk, returns, consumer sales via customer sentiment analysis, etc.
According to Hans Gobin, financial director at pharma firm Norgine, there are some small technology tools out there that can help FP&A professionals predict performance. “But most of us are still using big company technology like IBM Cognos’ TM1 enterprise planning software, which isn’t necessarily set up for quick big data analysis,” he added.
Finding and developing FP&A talent
The difficulty FP&A departments face finding and developing talent was also a major topic of discussion. This comes as no surprise; in fact, AFP just released a new FP&A Guide this week addressing this very issue.
Richard Waigo, senior director of FP&A at Viacom, noted that despite using different agencies to recruit people, his organizations still ends up mostly interviewing accountants who have only done a bit of FP&A. He made it plain he wants people to put the emphasis on the “A” for analysis in their job titles.
“People are either inquisitive or they’re not. Some just churn numbers, while others question numbers,” said Pamela Kuepfer, head of planning and capital management at Royal Mail.
Professional development was also on Boer’s mind; he wants to ensure his teams in London and Houston build the right skillset, including team members at the SSC. This prompted Jeff Glenzer, vice president and chief operating officer at AFP, to recommend considering the AFP FP&A Certification.
Single version of the truth
The issue of a “single version of the truth” arose because making the numbers align for everyone within a corporation still matters. It is necessary for some multinationals operating in a lot of countries to use constant rates to make foreign exchange numbers align, but they’ll still need constant updating and data cleansing remains an obligation. “Equally, those on an acquisitive bent might face difficulties in amalgamating figures across disparate companies and technology silos,” commented Mubbashir Khan of Mak Global
The financial planning element in an FP&A professional’s job title is still relevant and numbers must align, but the duty can perhaps be left to a standalone financial controller in larger finance departments, allowing analysis to dominate the FP&A function. At smaller departments, where one person typically performs both duties, technology should be able to help free up analysis time. Good systems can automate number verification and data accuracy work via standardized reporting mechanisms. This should give staff time to do more rewarding predictive forecasting and value-adding strategic work.
Katherine Laverick, MI manager in charge of FP&A at Tokio Marine Kiln Group, said that she is looking at how best to utilize the Anaplan cloud-based business modeling and planning platform to maximize the efficiency of the specialist insurer’s operations. Separately, she is also keen to promote a more analytical mindset in her team.
Shared service centers
On the issue of SSCs, attendees noted two key trends: first, that there are simply more SSCs as their popularity increases, and second, some FP&A functions favor a “blended” approach, which keeps some processes onshore and others offshore.
For financiers, the cost differential of hiring professionals in London, versus say Hungary, is vast. But some finance specialists, FP&A staff and planners will always need to be based close to headquarters in order to deliver best performance and contribute towards strategy. They cannot be outsourced.
“We have transaction processing SSCs, but I cannot see how you can use a shared service center for FP&A duties,” said Richard Waigo, senior director of FP&A at Viacom. “You’ve got to be close to your key people.”
Cultural differences will also come into play if you move offshore to say, India or other low-cost centers around the world, particularly if it involves anything beyond straightforward transaction processing.
“Fundamentally introducing SSCs is about cost reduction. The service issues, and whether to do it or not, have to be seen in that framework,” added Waigo.
It’s a point Gobin agreed with. “But in acquisitive companies, one also has to think about the scalability of operations,” he said. “This is where a good SSC can give you the upper hand.” SSCs can be flexible and programmed to suit each corporate’s own needs but who and what remains in the center should be carefully assessed.Find out more about future FP&A Club events here.