Predicting the Unpredictable: How Can Businesses Plan for Brexit?
The only thing we know about Brexit is that no one knows what it’ll look like. The latest Deloitte CFO survey has confirmed, unsurprisingly, that Brexit remains the top concern for CFOs. Well over three-quarters of CFOs expect it to worsen the business environment, and over a third are more pessimistic about the financial prospects of their company compared to just three months ago. Brexit has been drawn out for over three years now, and there’s still no clarity or solid knowledge of how it’ll eventually pan out.
Dealing with risk is a part of running any business, but CFOs can plan ahead to minimise any impact. When it comes to Brexit, they need to start planning for potential outcomes as soon as possible to be on the front foot. Simon Bittlestone, CEO of financial analytics firm Metapraxis, shares his tips on how to prepare for what’s to come post Brexit.
Synonymous with uncertainty
Brexit is throwing up so many unanswered questions – will Britain stay in the customs union? Will EU workers be allowed to stay in their UK-based jobs? How will leaving the EU impact profitability? C-suite executives, especially CFOs, are responsible for paving the way for a smooth transition and mitigating any potential negative impacts on the business effectively.
To do that, they need confidence in their decisions more than ever, and this is where technology can step in. Risk-taking will always come as part of the job description for business leaders and nothing can replace the instinct of an experienced leadership team. But amongst such high levels of uncertainty, and when negotiations with Brussels take a different turn every week, technology can help instil confidence that instinct is leading to the best strategic decisions.
Brexit or no Brexit, financial planning starts with target setting.
Brexit or no Brexit, financial planning starts with target setting. Historically, businesses identify and outline their overall goals for the year in line with the business objectives. Keeping these targets realistic is vital for success, and doing so means understanding the importance of historical data. If the board can see performance trends within the context of the market, there is a far better chance of setting achievable goals from the start. Additionally, building a better picture of the company means management teams can understand all the business nuances and can better mitigate risk from the outset.
For finance to achieve data-driven success, it needs to overcome its greatest foible: Microsoft Excel. Though it can be customised to some extent, the tool cannot accurately reflect the complexity of an organisation with scale and agility and leaves the business vulnerable to human spreadsheet errors. It’s time to take advantage of financial analytics. Political and socio-economic factors are making markets more uncertain, so CFOs need to be far more agile when it comes to financial planning. The ability to run quick ‘what-if’ scenarios and see the potential impact of them is invaluable, and it’s just not possible with Excel.
Practical and proactive
With so many uncontrollable factors in the mix, companies need to retain an element of flexibility in their business planning. It’s no longer sustainable, or indeed sensible, to run a one-off annual planning session that cannot be tweaked throughout the year, as different factors come into play. If businesses want to keep achieving their set goals, they need to identify potential future uncertainties, risks and changes now, and be able to react to them on an ongoing basis.
It’s no longer sustainable, or indeed sensible, to run a one-off annual planning session that cannot be tweaked throughout the year, as different factors come into play.
Financial analytics can map all the key performance drivers across the business and build up a comprehensive picture of the history of the organisation, including how performance is affected by certain external events. In doing so, the business can effectively undergo scenario modelling – a game-changer when it comes to the endless questions and possibilities associated with Brexit.
Modelling the different possible outcomes of hypothetical situations will allow finance teams to better understand their potential impact. This can be done for both internal structural changes and external events to give invaluable insight to inform better strategic decisions. It’s possible for all this to happen in real-time in the boardroom: saving time, money and increasing chances of success too.
In the past, management teams could afford to be more insular in their approach – there was no need for anything other than internal factors to be taken into account, and planning was entirely focussed on the business’ own financial year. Now, it’s very different. There are so many uncontrollable factors impacting the market and contributing to financial uncertainty. CFOs don’t have to resign themselves to being unable to plan for this, they just need to have the right technology in place. Financial analytics and scenario modelling will allow CFOs to implement rolling plans that can adapt to fluctuations in the market. This agility is the key to weathering the Brexit storm.