Agile Finance for a New Normal

While the global impact of COVID-19 continues, it is clear that finance functions have to evolve away from financial reporting and focus on value creation.

In response to the new normal, finance will create value by adopting an agile operating model.

Agile Finance operating models focus on interpersonal relationships and human intelligence over number crunching. Agile teams ‘leverage’ finance skillset across operations and centralize thinking and expertise.

Agility under the new normal will require businesses to turn on a dime in response to threats and opportunities. Agile teams will move away from pre-Corona status quo of annual reviews and reactive strategies, by shrinking planning and review horizons. The table below helps explain this further.

Under the new normal, agile finance will initiate focus on action over research, and testing over analysis

Agile Strategy Post Corona 

Shorter planning cycles and Frequent KPI reviews

 [ Provides early feedback, Decreased planning difficulty, Allows for less inertia between plans ]

 

 90 Day review


P
lanning cycles must be a maximum of 90 days, including setting of rolling budgets, KPI setting/ reviews.

Increased Scenario planning

[ Helps alter mental models,Removes pre-existing planning bias ]

 

Frequent Scenario planning

 Across  the 90-day horizon,  scenario planning will follow Base Case, Worst Case, and Best Case, all linked with sensitivities built around business indicators – cash flow, KPIs, inventory levels, etc.

 

Zero-based budgeting ( ZBB )  models

[ Better resource allocation, Removes planning bias ]

 

Only Zero-based budgets (ZBB)

Budgets will be reset on a Zero-Base basis at every 90-day horizon. ZBB will remove  budget bias leading to maximum cost-benefit based resource allocation.

 

Under the new normal, agile finance will initiate focus on action over research, and testing over analysis. This startup mentality, when coupled with acceleration of analytics, will allow companies to turn on a dime and tackle new challenges however difficult they may appear to be.

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