The past two years have been tumultuous for CFOs. Covid redefined business models, upended carefully crafted budgets and dispersed finance teams to their bedrooms and dining rooms. Then, just as the world seemed to be emerging from two years of masks, lockdowns, and supply chain disruptions, Russia invaded Ukraine.
Swift government sanctions effectively removed much of Russia from the global economy. Within days, major corporations were shuttering operations in Russia and trying to evacuate workers from Ukraine. CFOs were scrambling to assess the impact to their business. Immediate answers are needed to questions such as how much business do we do in Russia and Ukraine and what will be the impact of rising oil prices on our cost structure?
Many CFOs are dusting off their playbooks from 2020 to adapt to these new disruptions. While the impact of disruption in Russia and Ukraine is not as severe as Covid (at least not yet), the actions taken to mitigate market and supply chain disruptions during the early days of the pandemic have applicability to the current situation.
In this blog post, we describe 3 key capabilities CFOs need to put in place to manage material unexpected disruptions to their businesses.
Deep and current understanding of global supply chains
Many companies have already been seeking to reduce the length of their global supply chains and create a more resilient model that is less impacted by single market events. CFOs are also looking at increased stress-testing of supply chains. For example, the shutdown of Chinese manufacturing in mid-2020 and the curtailment of economic activity in Russia and Ukraine have highlighted the importance of creating more flexible and responsive supply chains.
Deciding to increase stock levels to cushion against potential disruption is not the answer. CFOs should continue to adhere by lean principles and leverage more granular demand and supply data to add resilience and flexibility to their already efficient processes.
Planning capabilities that explicitly address volatility and uncertainty
Adaptive and flexible planning is a hallmark of those organizations that can navigate an uncertain and volatile world. Scenario planning is the most valuable pre-planning tool CFOs can adopt to help prepare. Many companies are not directly impacted by the crisis in the Ukraine, but what if the two countries involved were China and Taiwan?
China is both a major source supply and, for many, a major market, Taiwan is the world leader in microprocessor manufacturing. If China were to invade Taiwan and similar sanctions were in force the impact would be many times more severe. How would your organization adapt to such a situation?
CFOs are embedding planning processes that:
- Integrate strategic planning, operational planning, budgeting, forecasting, and reporting processes
- Transition from calendar-driven cycles (annual plans, quarterly forecasts, monthly reports) to data-driven cycles that are triggered by changes in market, operational, or financial data at a granular level
- Leverage advanced analytics powered by AI and machine learning to inform decision making by running large-scale simulations
Financial data platform that provides a visible, transparent and current view of all aspects of the business
Plans are only as good as a company’s ability to execute. CFOs recognize this and are looking for technology to deliver scalability, flexibility, and agility. Speed of response is crucial. If your finance team is wrestling with different sales and revenue systems, multiple charts of accounts, and inconsistent data definitions they will not be able to react with speed.
Historically, the approach was to try and implement a single global system, such as an ERP, to support all businesses. However, for many this has proven to be very expensive, difficult to implement, and inflexible. The good news is that companies can leverage a financial data platform to remain agile.
A financial data platform, or FDP, provides a single source of truth for all of your financial data. FDPs connect with your existing finance ecosystem to consolidate data using pre-built API integrations. Leveraging a graph data model, FDPs automatically standardize financial data into a usable format and unify accounting events across your entire transaction journey. Once the data is cleaned, you can plug in your ERP, BI tool, or data warehouse to generate accurate and reliable financial reports that provide visibility into business performance.
The bottom line
It is impossible for organizations to fully prepare for once in a lifetime events like Covid or Russia’s invasion of Ukraine. Yet, if these events have taught us anything, it is that more seismic global events will occur in the future. The best CFOs will have built a resilient and flexible financial data platform that provides visibility and transparency to real time business performance so they can plan and react with speed and confidence.
