Globalization reshaping commerce.

• Author: Axson, David
• Position: Planning and Forecasting

Globalization has become an unstoppable trend that is reshaping the world of commerce. Today's supply chains stretch from Dalian (in China) to Des Moines; retailers sell goods from Moscow to Manila; and chief financial officers from Santiago to Stockholm are trying to analyze profitability across a host of global markets.

However, from the perspective of the C-suite - and in particular, of CFOs - the world is not flat. Divergent economic growth rates, distinctive consumer preferences, varied competitive environments and different currencies, cultures, tax regimes and regulations all require strategies, management processes and operating models that can adapt to diverse and volatile market environments.

This makes the task of developing and managing credible plans and forecasts increasingly difficult in a world where the only certainty is uncertainty.

Globalization also brings events and trends originating on the other side of the world much closer to home at a moment's notice. Whether circumstances involve the volcanic ash disrupting European airspace in 2010, the Japanese earthquake of 2011 or the flooding this year in Thailand, commercial impacts now reach far beyond their origins. In earlier times the impact of such events was largely localized; now, global supply chains are disrupted and quarterly earnings targets are missed

As the function tasked with allocating funding for growth and driving expense management, finance is central to the task of successfully navigating the global business environment. Yet today's finance functions may not meet the demands of this changing role.

What is required is a new operating model for finance: CFOs must transform their functions to support flexible and scalable global operating models that allow organizations to find advantage and growth in the midst of volatility and uncertainty.

Managers everywhere have found that the traditional rules and processes governing their actions are ineffective. The bedrock of the management process is composed of multi-year strategic plans, detailed annual budgets, quarterly forecasts and monthly financial reports that do little to accommodate uncertainty and volatility.

Two of the most significant challenges associated with thriving in today's more global and volatile environment are managing performance across a broad range of markets and planning for uncertainty and volatility.

Globalizing Performance Management

To help companies manage performance across a broad range of markets and circumstances, finance should implement and monitor metrics...