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Forecasting risk is now a major concern in today’s companies, survey

The Association of Finance Professionals 2014 Risk Survey of 554 AFP members revealed that the top risk concerns had changed with businesses recently shifting their focus from macroeconomic factors to issues surrounding competitors and customers. One of the general concerns raised in the survey was how the FP&A (Financial Planning & Analysis), strategic planning, and risk manager functions could work together more effectively.

One specific concern in the surveyed companies was their ability to integrate risk and forecasting data with strategic decision making and their ability to capture relevant data within the company, as the chart shows.

Source & Copyright©2014 -  Association of Finance Professionals 

Key overall conclusions from this year’s survey included: 

  • Organizations continue to be exposed to a certain level of uncertainty in the business environment. Eighty-four percent of respondents report their organizations are exposed to the same or more uncertainty currently than three years ago. 
  • Organizations are focusing on risk awareness in order to respond to current and emerging business risks to ensure business success. The most popular actions organizations have taken include focusing on risk culture and awareness within the organization, followed by setting revenue growth targets and investing in IT systems. Other approaches include diversifying product lines and offerings and revising margin growth targets. 
  • The top-level management and organizational oversight are increasingly involved in risk management. Financial professionals note that risk management is either “extremely important” or “very important” at their executive management level and Board level (cited by 92 percent and 86 percent of respondents, respectively). 
  • Organizations benefit from increased integration between FP&A and risk management. Companies with greater integration between the two functions are better positioned to thrive in an uncertain business environment. Improved quality of finance and risk inputs from all business units provides the executive team with better business insights for strategic planning, forecasting and financial planning. 
  • Leading companies are focusing on collaboration between FP&A and risk management. Joint efforts in the collection process of key finance and risk inputs has the potential to result in greater efficiency in data collection and storage, and improved quality and consistency of data for analytical purposes within FP&A and risk management. 

CTMfile take: Developing integrated cash flow, risk and strategic forecasts, and business plans is one of the central and most complex problems in large companies. The one thing that is clear is that corporate treasurers should have, and must fight for, a central role in this process. If you don’t have a central and strategic role in this process how will you know what is going on, what are the real drivers in your business and what liquidity, etc. will be required. Relying on being told is a recipe for disaster.

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This item appears in the following sections:
Risk Management
Financial Risk Management
Cash Flow Forecasting


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