With a global recession looming, large organisations across the UK and Ireland are failing to utilise financial planning and analysis (FP&A) to its maximum potential to effectively mitigate against market shocks; while an alarming number lack confidence in the accuracy of their business report procedures.
This was the primary narrative of a recent survey by MHR International, which surveyed over 500 senior managers in large organisations from across the two nations as part of its ‘Business Resilience‘ report to find out their views on business resilience and the future of their organisations.
A concerning 47 per cent of the countries’ largest organisations admitted that significant improvements to their FP&A were required to support their future resilience to market shocks, something that was much higher on the agenda when compared to the average organisation, where just 36 per cent agreed.
In addition to this finding, only 37 per cent who had made significant changes to increase their organisation’s business resilience in the last five years said that more informed planning and analysis was one of the routes to doing so – behind digital transformation (48 per cent), process improvements (48 per cent) and workforce management (44 per cent).
FP&A improvements failed to qualify for the top five operational changes made to the organisation in the past, and were only fifth on the list for such measures in the future. Perhaps ironically, ‘fear of business disruption’ was the top reason why organisations are holding back from investing in the tools, technologies and platforms needed to boost their resilience to such disruptions in the future.
Recognising how elements of FP&A remain dormant in protecting a business against market shocks while improving its resilience, MHR CFO Mark Jenkins recommends that “with a backdrop of market volatility, black swan events and a recession on the horizon, getting financial forecasting right has never been more important.”
The research also revealed a troubling lack of confidence in business reporting and modelling imposed to cushion the blow of market volatility. A mere 32 per cent of organisations reported feeling ‘very confident’ in the accuracy of their business reporting and modelling, whereas only 18 per cent were less than ‘somewhat’ confident.
On a similar and equally concerning note, less than one in ten said that their organisation had a ‘good understanding’ of the current and future risks facing the business, however the reasoning behind this stunted level of confidence is equally as intriguing
Nearly three-quarters of organisations struggle with getting clear visibility of company performance and key metrics, with over a quarter of businesses saying this is ‘very challenging’.
The report also cites the associated cost as a barrier, with 51 per cent admitting that they could ‘just about cover’ any investment needed to support operational changes. Indeed, four in five leaders said their organisation had or was planning to seek external loans to support their cash flow, with a quarter saying that a lack of funding was actively preventing these changes from being addressed.
“There is understandably a hesitance to make new investments at a time when we’ve already experienced so much uncertainty, and there is more to come,” Jenkins adds. “But the only way to overcome this uncertainty is to be sure that your business is safe and secure to come out of this disruption on the other side – and business planning is a crucial part of this.”