Gone are the days when FP&A was limited to a company’s finance department. Modern FP&A extends to the entire organization, blurring all the boundaries and siloes. New-age FP&A solutions allow businesses to use processes like continuous planning, advanced analytics, reporting, etc., in the interest of multiple departments across an organization.
Scenario planning plays a pivotal role in building modern FP&A solutions. It helps businesses analyze potential outcomes of multiple scenarios and prepare themselves to tackle the risky aspects.
Let’s understand the power of scenario planning and how it helps your business.
What Is Scenario Planning?
Scenario planning is a set of processes dedicated to identifying different potential outcomes and impacts of specific scenarios. It allows businesses to evaluate the right responses and handle both positive and negative possibilities regarding different scenarios.
Scenario planning has a wide scope and can apply to a range of different instances, such as projecting your business’s financial earnings, estimating your cash flow, tackling unexpected delays, etc. Effective scenario planning equips you and your team to handle any situation by pre-analyzing all possible outcomes of the same.
Why Is Scenario Planning Important For Modern FP&A?
Here are a few major reasons why you should include scenario planning in a modern FP&A solution:
Dealing With Uncertainty
Scenario planning is one of the most effective ways of dealing with uncertainty. Irrespective of the department you work in, you are bound to encounter uncertainties while working on your projects. Instead of hitting a dead-end and panicking when the issue arises, scenario planning prepares you to deal with uncertainties in the best way possible. It helps you identify alternative paths to take to prevent stagnation and unwanted delays.
Adequate Allocation Of Resources
Different scenarios require different resources to navigate through the situations. Scenario planning gives you an estimate of the resources you may require for a specific scenario. This helps you allocate your resources in advance, saving your team from being clueless while facing the concerned scenario.
Preparing Initial Responses
There may be scenarios where your finance and operations teams will be required to respond in an adequate manner. Scenario planning allows these teams to prepare their initial responses in advance, depending on the likelihood of each potential outcome.
Filling In The Absence Of Key Stakeholders
Important stakeholders responsible for making important decisions may be absent in a specific situation, making matters difficult for their team members. Scenario planning allows you to rely on documentation in the absence of these stakeholders, making sure the work gets done in a timely manner. During such situations, scenario planning can act as a shield to protect you and your team from undesirable outcomes.
Stay Prepared To Tackle All Scenarios With VIZIO
VIZIO helps you implement modern FP&A solutions equipped with seamless scenario planning features. Rest assured that our team of experienced and passionate IT professionals will design solutions that are in sync with your business goals and help you tackle all possible outcomes