The era of volatility: what's the business response?

• Author: Hosley, Steve
• Position: TECH STRATEGY

Business transformation is nothing new, but on the heels of one of the largest financial crises the United States has faced, companies are now laser-focused on repairing those areas shown to be ineffective over the past two years. Many were surprised to find out that their investments in state-of-the-art enterprise resource planning, consolidation software and new budgeting and forecasting technology did not provide the visibility, transparency and agility needed to adequately respond to the dramatic market events that unfolded.

During this same period of time, many businesses made dramatic cost-cutting decisions that were key to their survival. They're now busy repairing, rebuilding and fortifying both their planning and monitoring areas, as well as retooling operations to ensure sustained cost reductions and a more agile and scalable enterprise.

During this period of upheaval, dramatic differences emerged between how typical companies fared and how top performers in finance did. World-class companies were able to respond much more effectively to dynamic market shifts.

These finance organizations shared many similarities in how they approached budgeting, forecasting and planning and how they delivered their core general and administrative activities. They all had some form of enterprise performance management (EPM) system in place that provided visibility, as well as service delivery models (SDM) that provided the strategic scale needed to achieve sustained cost reductions.

The combination of technology, end-to-end process design and the inclusion of planning best practices were all key ingredients in insuring that their enterprise performed well.

IS VOLATILITY THE 'NEW NORMAL?'

Volatility and uncertainty are here to stay. Though last year showed some encouraging signs of economic recovery, the road ahead is likely to be more volatile than in the past. This is the "new normal." In The Hackett Group's 2011 Enterprise Performance Management Key Issues Study, chief financial officers said they believe increased market volatility/risk in combination with changes in business strategy is causing a level of uncertainty that is far higher than the historical norm. Therefore, it is no surprise that improving budgeting and upgrading forecasting processes head the list of priorities for finance this year, while other EPM processes, such as reporting and planning, follow closely.

Almost all companies participating in the study said they plan to invest...