- Latest research shows that FP&A is not being used effectively to counter market shocks
- Three quarters of businesses struggle to get clear visibility on their company performance
- Less than a third of organisations are ‘very confident’ in the accuracy of their business modelling and reporting
Nearly half (47%) of the UK and Ireland’s largest organisations say that they need to significantly improve their financial planning and analysis (FP&A) to support their future resilience to market shocks.
The new research from HR, payroll and finance experts MHR International reveals that this is far higher on the agenda than for the average UK and Irish organisation, where just over a third (36%) agreed the same.
MHR surveyed over 500 senior managers in large organisations across the UK and Ireland as part of its Business Resilience Report to find out their views on business resilience and the future of their organisations.
Only 37% of respondents 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%), process improvements (48%) and workforce management (44%).
FP&A improvements didn’t make it into the top five operational changes made to the organisation in the past, and was 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.
Mark Jenkins, CFO at MHR said: “FP&A is not yet being used as an effective part of a business’ arsenal to fend against market shocks and increase business resilience. 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 that just one in three (32%) organisations are ‘very confident’ in the accuracy of their business reporting and modelling – whereas nearly one in five (18%) of the leaders surveyed were less than ‘somewhat’ confident. Similarly, less than a third (29%) said that their organisation had a ‘good understanding’ of the current and future risks facing the business.
The reasons behind this lack of confidence were also interesting. Nearly three quarters (73%) of organisations struggle with getting clear visibility of company performance and key metrics, with over a quarter of businesses (26%) saying this is ‘very challenging’.
Cost is also a barrier: 51% of the businesses surveyed said 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 cashflow, and a quarter (25%) said they had a lack of funding to make such changes.
Jenkins added: “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. 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.”