Adam Rhodes, Principal Solution Consultant at Anaplan
The finance sector is dealing with a lot of volatility. Skyrocketing interest rates took many in the sector by surprise, squeezing profit margins and putting more pressure than ever on cost management. Inflation and the cost-of-living crisis have also led to increased risk as institutions prepare for more borrowers to default on their payments. In reaction to inflationary pressures, central banks around the world have raised interest rates dramatically. Since December 2021, the Bank Rate has risen from 0.1% to 5%, with similar hikes in other jurisdictions, as reported by Bank of England.
Similarly, customers are grappling with less disposable income, asset managers are seeing less new business or management activity, which negatively impacts fee income. Insurers are also feeling the pinch as rising interest rates drive up the cost of claims, and supply chain issues make it harder to process claims quickly, straining margins even more.
At the same time, the sector can’t afford to ignore the needs of its customers – which means getting staffing, pricing, real estate, and digital offerings right.
For the entire sector, then, the current environment requires a balancing act. Leaders must maximise current shareholder value and mitigate short-term risk while retaining customers and strengthening the organisation’s long-term reputational value by offering affordable, reliable products and services.
Planning has never been more critical to success – but agile, data-driven, connected planning, where key indicators inform predictive plans and models that can be adjusted quickly to meet change and keep the business on track – must be made a priority.
Striking a balance between maximising costs and maintaining customer trust and strong relationships
As the finance sector is currently experiencing volatility, the needs of its customers are also evolving at the same time. So what can enterprises do to stay ahead of the curve to maintain customer trust and loyalty?
The simple answer is that it all starts with planning. The sector needs to employ connected planning processes to accomplish its performance goals, which range from sales planning and product and service offerings to budgets, headcounts, and overhead expenditures. However, the planning process is much more than a one-dimensional explanation of how to reach a goal.
Planning entails collaboration about not only financial or budgetary goals but also the resources and techniques required to achieve them. The planning process brings everyone from back-office workers to stakeholders in an organisation together to execute a well-organised and strategy-aligned plan. To grapple with the changing needs of customers, the sector needs a plan that will evolve to accommodate its customers.
With increasingly capable and user-friendly technology, companies can fundamentally improve their planning process. Indeed, the right technology enables businesses to adopt a continuous planning approach and transform previously disconnected processes into connected and integrated planning. It is crucial to have flexible technology that gives the financial planning and analysis (FP&A) teams the ability to run “what-if” scenario analyses to quickly see the impacts of assumptions and their effects on business outcomes. This enables businesses to plan, adjust for, and accommodate changes in market or consumer demand.
Sector’s saving grace: agile and data-driven planning
With the economic downturn, companies need to adapt and act quickly. Planning is a critical enabler of faster and more informed decision-making. Despite the fact that data is everywhere, many businesses do not derive the business value they expect from their planning process. Why? It is not dynamic enough to adapt to changes, is not collaborative enough, and may be based on error-prone legacy solutions that do not fully leverage the power of data. This is because the data is usually stuck in silos across the business, causing a disconnect when action needs to be taken.
Without relying on time-consuming and complex pivot tables stuck in silos, having a connected planning technology which is intuitive to changing markets enables leaders to view data analysis from multiple perspectives, such as costs by geographic region, product line, or sales channel. This frees up valuable time during the day for data analysis and strategic initiatives, allowing for a quicker response to market trends and more time to focus on customer’s changing needs.
As flexible planning enables companies to stay agile and make more data-informed decisions, it’s a key ingredient for the finance sector trying to find the right balance between increasing revenue, decreasing risk, and driving customer value as the economic market changes.
