How Unit4 FP&A can improve financial risk management
The ability to plan, manage, and forecast based on data analysis, is a key part of identifying and managing financial risk for the Office of the CFO.
This kind of process can be unmanageable with legacy systems such as Excel, or manual processes. That said, modern FP&A software can provide features to improve risk management and enable the Office of the CFO to potentially avoid certain risks, and plan for different scenarios by ‘thinking data forward.’
When empowered with Cloud FP&A, an organization can empower even non-financial staff with a culture that encourages those responsible for projects to recognize uncertainty and address it with technology.
In this blog, we explore how Financial Planning and Analysis (FP&A) software can improve risk management – keep reading to learn more.
What is risk management in FP&A?
Risk management in FP&A refers to the process of identifying, assessing, mitigating, and monitoring risks that could impact an organization's financial performance, operational goals, or strategic objectives. It helps organizations proactively address potential issues and make informed decisions to ensure stability and growth.
In other words, risk is a natural factor in any contractual or financial dealing. Those organizations that thrive can manage risk by modeling and forecasting its impact and creating actions based on the severity of the risk. This allows financial teams to act before risk damages an organization’s bottom line.
Risk management shouldn’t be purely conjecture, it should be led by holistic data with visibility and transparency of how financial risk affects other departments, not just finances.
Identifying risk is tough with manual processes, but FP&A software is tailor-made to model risk, and even has features to aid in the analysis of risk such as AI analysis, dashboards, reports, and more.
Managing the unpredictable
There is also risk involved in the unpredictable. It’s easier to assess risk in something you know will happen, a merger or acquisition for example, but something like the pandemic is a prescient example of risk in the unpredictable.
Notably, those who had the agility and flexibility to manage the risks with agility, as they occurred, had the most success and resilience in this period thanks to world-class FP&A techniques. The knowledge and experience of your people working in other functions are invaluable for a comprehensive evaluation of potential impacts.
For risk management to operate in anticipation of risk and change, collaboration is key. Operational teams, or those working in demand planning, must compare data and identify anomalies, as must different functional departments like HR, Finances, Sales, Projects, and Procurement.
While it’s tough to recommend how organizations should operate when unpredictable changes occur, there are some best practices for recognizing and responding to the new reality:
- Monitor the external environment, identify new trends and innovations with a focus on the changes that those bring
- Determine the significance that identified change, or innovation has on the company and its key stakeholders
- Depending on the level of significance, identify and prioritize what the company should and could do differently in response to those changes
- Define the action plan, including the roles and responsibilities of the individuals
- Implement the action plan
- Monitor the execution of the action plan
- Measure the performance of the outcomes
- Share the update on the progress with relevant parties
- Take corrective actions if needed
- In parallel, continue monitoring external developments and repeating the process
How can Unit4 FP&A enhance your Risk Management processes?
Unit4’s intelligent FP&A software solution sets your teams free to spend more time delivering insights and creating value for your business. We help you understand the numbers more deeply and turn that insight into action for better business results.
Once you have decided to go ahead with a specific project, FP&A is on hand to help the project lead focus on the project data to keep track of the project’s progress and provide early signals for significant variances.
To help put things into perspective, FP&A can provide what-if scenarios and financial impacts of changes in percentages. This could be anything from the effect on sales and profit if you lose 1% market share, for example.
Our FP&A software solution sets your teams free to spend more time delivering insights and creating value for your business. We help you understand the numbers more deeply and turn that insight into action for better business results.
Visit our webpage, and dedicated FP&A page, to discover how we enable risk management with automation, AI-infused financial planning and analysis, forecasting, highly interactive dashboards, and powerful, pre-configured models. Talk to sales today or read our factsheet for more in-depth details on our risk management features.
