establishing a finance business continuity plan

Step 1: Continuous planning strategy formulation

Strategy formulation is an initial step in linking strategy and execution as part of continuous planning. The tools and activities used to support strategy formulation should answer the questions:

• Where are we going as an organization?
• What initiatives are needed to get there?

Perform dynamic ‘what-if’ modeling and scenario analysis

Financial forecasting is an important component of continuous planning and the strategy development process. Given the high levels of uncertainty in today’s environment, more demands are being placed on finance professionals to perform dynamic “what-if” modeling and show alternative future views. This includes layering the financial impacts of including (or excluding) strategic initiatives, such as launching new services or expanding facilities.

When attempting to forecast and model varying scenarios, finance professionals should start with a base case given current trends and future expectations, and then layer on the impact of discretely modeled initiatives. While challenging to do using stand-alone spreadsheets, modern software solutions can simply and quickly perform scenario modeling and forecasting of varying versions of growth and cost management initiatives. This approach allows for detailed and accurate modeling of each initiative to ensure that the go-forward impacts are well understood.

Scenario analyses provide a competitive advantage by evaluating various combinations of activities. This allows finance leaders to identify the best mix of initiatives to support business and financial goals, prepare for potential changes, and respond more nimbly when changes occur.

Allocate capital to align with strategic goals

Capital planning has become an increasingly strategic function for many organizations. If done effectively, allocating capital dollars to projects — such as construction, equipment purchases, and information technology (IT) needs — can positively impact an organization’s competitive positioning and help facilitate growth. The challenge for many finance leaders is the lack of enabling tools and frameworks to streamline initiating, evaluating, approving, and monitoring capital projects that best align and support the organization’s overall strategic plan.

What makes this such a challenging process? For many organizations, the award process often is not based on merit, but rather on a “first come, first serve” basis, frustrating those making requests and skewing organizational priorities. Transforming the process should address the following areas:

1. Initiating new requests: By standardizing the input form(s) associated with all new capital requests, you can structure how proposed projects will be evaluated across financial and non-financial measures. Initiators should be guided with prompts or comments fields to define the core elements of the project in a consistent manner. Examples include Project Owner and Sponsor, Spend Category (i.e., Construction, IT), Justification, Capital Needs (current and future years), and Strategic Goal Alignment.
2. Reviewing submissions: Especially for larger capital requests, conditional workflow tools should be used to automate alerts and notifications to key contributors when their input is needed. For example, large technology projects may need to go to IT and Legal for evaluation before finalizing. These expert reviews ensure that each project is complete and accurate.
3. Evaluating and approving projects: By having access to a single source of consistently defined project submissions and effective reporting tools, the evaluation committee(s) can effectively review and compare requests. Ideally, approved projects will create a portfolio of investments that span construction, IT, and equipment investment.
4. Tracking progress: Having timely access to reports that highlight actual project spend to-date against approved capital gives executive leaders visibility to monitor progress and assure committed funds are tracking as expected. Ideally, progress monitoring is supported by transaction-level financial reporting and includes project-related commentary to highlight milestone achievements.

 Step 2: Continuous planning strategy alignment

As previously mentioned, finance plays a critical role in helping to translate the impact of defined strategies on operational and tactical plans. These continuous planning activities help ensure alignment between financial and strategic planning efforts by guiding organizational leaders to answer the question: How do we get there? Two common areas of focus in strategy alignment are statistical planning approaches and initiative-based planning.

Incorporate statistically driven planning approaches

For many organizations, the use of stand-alone spreadsheets or rigid planning applications has relegated the planning function to more of a bottoms-up, data-collection activity. In turn, the ability to adjust the plans and account for strategic initiatives (i.e., additional capacity) or baseline projections related to revenue and expense plans becomes a time-consuming, manual process.

By contrast, statistically driven planning models leverage existing relationships, such as the relationship between revenue drivers and departmental plans. As a result, changes made globally easily flow through to net revenue plans, workload, and labor and expense plans.

Leverage initiatives-based planning

Initiative planning provides the ability to translate high-level strategy into actionable operational plans. Dynamic planning models increasingly incorporate the initiative as a planning dimension. This allows the cross-departmental initiative to be modeled discretely and in detail, then layered as an incremental expense into the baseline budget model. The benefit is two-fold:

• Managers can clearly identify the impacts each initiative is having on final budget targets
• Initiatives can be changed efficiently if underlying assumptions prove invalid

Step 3: Continuous planning performance monitoring

To effectively manage defined strategies and financial plans for continuous planning, they must be monitored on an ongoing basis. To determine their success, finance professionals must answer the following questions:

• Are we achieving the results we hoped?
• Do we have visibility into where outliers exist and why?

Finance teams leverage several techniques — rolling forecasts, executive reporting, and alerts/notifications — to better understand their success in executing their defined strategies.

Build flexibility with rolling forecasts

Finance teams are embracing — and benefiting from — rolling forecasts as a way to monitor and trend performance against established financial targets. Actual and monthly projections out 18 months provide a trended view of performance, typically represented at an entity level. These models help assess current realities and can influence longer-range (multi-year) projections and detailed operational plans. These tools help finance professionals more effectively monitor where established planning assumptions may be inaccurate. This enables them to more proactively address corrective action plans or reforecast where needed.

Provide clarity with role-based scorecards, dashboards, and mobility

Finance teams are stewards of data that guide business decisions — such as cost and profitability analytics and target staffing calculations. The notion of information delivered by role is important to ensure that end users aren’t overloaded with information; rather, they are directed with the right information, at an appropriate level of detail, to decision-making. Tools that can visualize data and allow for mobility (i.e., delivery via a tablet or mobile phone) are an important complement to traditional management reporting.

Enhance communication with alerts, notifications, and comments collection tools

The ultimate goal of any performance monitoring function is to establish clear visibility of outliers to plans and scenarios across management levels. All too often, however, reporting becomes a one-directional dump of financial and operational statistics that poorly highlight “what” is wrong but offers no feedback loop to more senior leaders as to “why.” Best practice approaches leverage alerts to highlight where variances exist, incorporate push notifications (i.e., via email) to stakeholders, and provide a vehicle to collect comments and action plans on high-threshold outliers. This creates a more robust, closed-loop reporting cycle across management levels within the organization.

With visual, actionable reporting and scorecards that utilize these three components, finance leaders can comprehensively view organizational performance. Leaders then can quickly identify areas where initiatives are underperforming, drill down to specific KPIs, and compare actual performance against targets. They can then use these insights to recalibrate as needed and focus an organization’s resources on areas where they will have the most significant strategic impact.