Playing Defence: Dynamic Resilience Planning, Resilience and the Opportunity for the Digital CFO
As we take a deep dive into the “digital CFO”, it’s the next generation of finance chiefs who are taking a leading role in identifying areas of strategic growth and opportunities, particularly as they relate to data-driven transformation.
However, digital CFOs must be concerned with more than strategic, offensive plays. They also need to maintain a defensive lens, and the ability to switch quickly between the two as required. In this article we will consider the role of dynamic resilience planning and the agile practices required to execute it, and how the digital CFO can take steps towards introducing both to the finance department.
Dynamic resilience: A new approach to continuity
While it’s never far from the top of the executive agenda, resilience has taken on renewed importance in the years since 2020. From the pandemic and extreme weather events to geopolitical upheaval in Europe and the Middle East, as well as quickly evolving consumer expectations, the operating environment seems to shift regularly – and dramatically.
As a result, businesses have faced ongoing supply chain disruption. Shortages have been the headline issue, but we’re seeing early indications that the next challenge is likely to be related to inventory glut in many industries. Other variables have also left their mark, including widely varying changes in demand, which in turn impacts cashflow and sales-based forecasting, as well as unprecedented staffing challenges.
Businesses with high levels of dynamic resilience were able to pivot quickly. This may have been achieved by redeploying staff to new areas, pivoting the agile business plan to operate in new markets or quickly reforecasting a cashflow plan, based on a number of key variables. For those with the available data these variables and actions could have included hedging pricing on certain goods, Forex considerations and future modelling of rising supply chain prices.
Dynamic resilience planning, supported by a robust integrated business planning platform, will allow the digital CFO to develop “playbooks” for a multitude of scenarios that could happen, for example an extreme weather event or an unexpected high-impact business challenge. Each playbook would guide the executive team to make agile, evidence-based decisions in times of crisis (or opportunity).
These may be robust enough and data-backed enough that they can be followed as business-wide strategies, even without significant and unprecedented external events. In all scenarios, the ability to work with data you can trust and model the potential impacts to the organisation within days, rather than weeks, is critical.
The digital CFO is likely to be running a finance department with access to tools that have the ability to forecast, model and report on an on-demand basis. This means that data doesn’t have to wait when the business needs it, which means the business can pivot towards growth faster, with more certainty and less friction.
Resilience requires flexibility, and a change in mindset
Historically, finance teams have been highly structured and fairly rigid in their structures. However, we have seen that resilience, flexibility and agility go hand-in-hand. Thus, as the digital CFO’s priorities are shifting, the finance team’s activity and approach need to shift as well.
Some forward-leaning digital CFOs have started to rethink traditional departmental structures to see if new ways can create more resilience and generate better results. In some cases, this means borrowing concepts from teams that have already undergone digital transformation, or those who have been tasked with developing and nurturing new products and growth ideas. That might look like:
Of course, in the world of finance certain deliverables and tasks are due at certain times. This is unlikely to change any time soon. However, outside those non-negotiables you can work towards an agile team mindset, resulting in increased focus on customer outcomes, data certainty, and an impact focus, often enabled by technology.
Where to start?
For aspiring digital CFOs, the answer to the question of where to start is always “in your own backyard”.
A traditionally structured finance department won’t become agile overnight, however you can start to make strides in that direction by focusing on introducing more adaptable reporting and data, which looks at business priorities and opportunities rather than periodic data.
Integrated business planning tools allow you to do faster reporting from multiple silos, including modelling scenarios and impacts. Budgets and forecasts can take days rather than weeks or months, allowing for more complete decision making, based on more certain data. By pivoting your reporting approach you can begin to lead the department towards an overall agile mentality, as well as model best-practice dynamic resilience planning to the broader leadership team.
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