The world is getting more chaotic. Events in Greece, swinging oil prices, and disorder in the Middle East all give the impression that we are in one of the most turbulent periods of human history. Whether this is true, or whether the constant onslaught of information from the internet and 24 hour news cycles simply make it appear that way, Finance Planning & Analysis departments must now consider vast amounts more when forecasting than they once did, and be far more proactive to adjust as events change rapidly.
Increasingly, FP&A professionals are moving away from the traditional static models and using rolling forecasts. A recent AFP study found that 44% of finance professionals are now using continuous forms of planning, as the old method becomes less and less viable.
A lot of this has to do with advances in the Cloud, as well as Big Data and analytics. The Cloud, in particular, is playing a huge role in helping the necessary information disseminate to where it is needed, often in real time. World-class FP&A organizations are no longer using the open architecture of a spreadsheet, moving instead to enabling technologies and an integrated platform that provides a set of global assumptions that apply to everyone. These are also already embedded in the planning process, and it enables data to be shared and rolled up to the higher level. Another advantage is that there is greater transparency of the assumptions and drivers.
Big Data and analytics are also helping to process the information at a faster rate than ever. Software is now available that can sort through the mass of unstructured data FP&A has in order to discover connections and patterns that previously would have taken months to discover, but can now take only minutes.
With such easy access to data, FP&A can start considering what-if scenarios. World events are becoming impossible to predict, and the best professionals in the sector have in place contingency plans for any and every eventuality allowing them to pivot when necessary. The world is now so interconnected, that any event sets off a chain reaction. Knowing how that chain is going to unfold is vital for accurate forecasting.