Despite the turbulence caused by the pandemic, the financial services industry has remained resilient. However, this isn’t a time for banks to rest on their laurels; they must move beyond the survival mindset bred by COVID-19 and start to seek out opportunities for innovation to meet future client needs.

The Office of Finance has traditionally supported front and middle office counterparts despite using disparate data sources, manual processes, and reliance on tools like spreadsheets. In future, this approach will not provide the agile, value-added decision support that is required. During the pandemic, many banks accelerated their digital transformation programs to enable their staff to work remotely and their clients to connect with them virtually but forgot the ‘back-end’ processes vital to giving banks the agility they need.

The Office of Finance should take this opportunity to rethink their approach to Financial Planning & Analysis (FP&A) and dissect the processes, systems, and tools they currently have in place. Banks will need to be agile, flexible, and fast-moving – but to do this holistically requires a finance function that is also agile, flexible, and fast-moving.

With the right FP&A solution underpinning these processes, banks will see, among other key enhancements, increases in forecasting capability and scenario testing.

Agility can be improved by increasing forecasting frequency. By moving to a rolling forecast, banks can better understand and manage the effects of one-off incidents, underlying trends, or more significant events. Aligned to this, creating and comparing different scenarios to see the financial impacts of their decisions will enhance the value that the Office of Finance adds to the wider organization.

When it comes to forecasting, which typically focuses on the income statement, the impact of decisions on capital and liquidity also needs to be considered. Integrating and incorporating balance sheet and cash flow forecasting with the P&L allows the Office of Finance to have a complete picture of what has happened, what is happening, and what may occur based on every decision.

In the years ahead, banks should also look to extend stress-testing throughout the organization. Utilizing the right technology, stress testing can help banks mitigate risk from external factors such as operational changes, cyber threats, and climate change. In the short-term, embedding stress testing into the overarching FP&A process will allow banks to test across multiple scenarios. This means most of the work to prepare for regulatory-driven scenarios and stress tests is already done, giving the bank a comprehensive understanding of the impact.

If banks don’t upgrade the technology, processes, and controls they use to perform FP&A, this ideal vision is likely to remain just that – an ideal. In a time of intense economic disruption, an agile and flexible FP&A process needs to become part of a bank’s DNA. Conducted through the right technology platforms, agile FP&A can provide business leaders with a tested roadmap to not just meet these challenges but proactively pivot their strategy to keep a strong bottom-line.

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