Any organization's financial planning and analysis (FP&A) department is essential. Its main responsibility is to support decision-making and provide financial insights to enable the organization to achieve its strategic goals.

To do this effectively, FP&A must ensure that it has a strong focus on scenario planning and risk management.

Scenario planning best practices

Scenario planning is a process that involves identifying and analyzing potential future outcomes for the organization. It allows FP&A to consider different scenarios and understand how they might impact the company's financial performance. This can be especially useful in times of uncertainty, when traditional forecasting methods may not be as reliable.

FP&A can help the organization better prepare for a range of potential outcomes by regularly conducting scenario planning.

To ensure greater focus on scenario planning, FP&A should follow these best practices:

Involve key stakeholders

Scenario planning should involve input from key stakeholders across the organization. This includes executives, department heads, and front-line employees. By getting input from a diverse group of people, FP&A can gain a more comprehensive understanding of the potential impact of different scenarios.

Use data to your advantage

FP&A should gather data from a variety of sources to inform scenario planning. This includes financial data, non-financial drivers, industry trends, customer feedback, and market research. The better quality data that's available, the more accurate the scenarios will be.

Regularly update scenarios

Scenario planning should be an ongoing process. As new information becomes available, FP&A should update and refine scenarios to ensure they remain accurate and relevant.

How scenario planning can prepare your business for anything
Reducing risk and building awareness of what could happen can help you prepare for almost anything. But how does strategic scenario planning work? And how can finance teams use it to future-proof the business? Find out here.
Finance AllianceSabrinthia Donnelly

3 steps for more effective risk management

In addition to scenario planning, FP&A should also have a strong focus on risk management. 

Risk management is the process of identifying, assessing, and mitigating risks that could impact the organization. 

By proactively managing risks, FP&A can help the organization achieve its strategic goals whilst minimizing potential disruptions or negative impacts.

To ensure a greater focus on risk management, FP&A should follow these best practices:

Identify risks

The first step in risk management is to identify potential risks that could impact the organization. This should involve input from key stakeholders across the organization.

Assess risks

Once potential risks have been identified, FP&A should assess the likelihood and potential impact of each risk. This will help in prioritizing which risks need to be addressed first.

Value creation plan: Uniting FP&A & risk management
In this blog post (and video), Stefan Gershater, the Director of Risk at Burberry, walks you through the process of collaboration between these two crucial teams to address both internal and external risks, while maximizing value in uncertain times.
Finance AllianceStefan Gershater

Mitigate risks 

FP&A should collaborate with other departments to identify and implement solutions to manage risks when they've been identified and assessed. This could include implementing new policies and procedures, implementing new controls, or transferring the risk through insurance or other means.

By concentrating on these scenario planning and risk management best practices, FP&A can offer the business helpful insights and support to navigate uncertainty and achieve its strategic goals.