As with most challenges faced by organisations in the 21st Century , Digital Transformation can help .
cost of lumber for its effect on overall profitability . Sensitivity analysis allows FP & A professionals to determine financial health by following interrelated indicators from an initial externality , such as the effects of inflation on the prices of raw materials . FP & A departments could focus on the top three to five expense drivers and trace them back to their inputs to see how inflationary pressures permeate the organisation and impact the overall balance sheet . By doing this analysis ahead of time , organisations can better manage cash flow , either by raising more funds or increasing their prices .
Point estimates and static budgets simply do not stand up in the current economic environment . Sensitivity analysis covers multiple scenarios and allows organisations to formulate more comprehensive plans for action given the advent of any one of those scenarios .
Andreas Simon , Regional Director MEA , Jedox
subfunction to deliver impact across their organisations and make them , to some extent , uncertainty-proof . Amid this impact , financial planners will be elevated from backoffice theorists to boardroom strategists . � enable organisations to unite their own rich data sets with third-party information such as real-time commodities pricing . In the world of hybrid work , cloud-based planning platforms enable smoother collaboration across all departments , supported by external drivers , AI and Machine Learning .
3 . Sensitivity analysis and scenario planning
When FP & A professionals apply a key input to discover its impact on a key driver , they are conducting sensitivity analysis . For example , a construction contractor in Dubai might examine the
The guiding light
The role of the FP & A department must undergo inflation of its own to prepare for the murky horizon . Collaboration on information gathering is required , followed by Digital Transformation that allows insights to be drawn from that information , culminating in an extensive interrogation of the information suite through thorough sensitivity analysis and scenario planning . This is what the FP & A professional brings to their organisation . They can , as trusted advisors , help organisations navigate inflationary terrain by following the three steps laid out here .
There are significant opportunities ahead for the finance function and its FP & A www . intelligentfin . tech