Senior management has used contingency planning as a tool for many years. Some organizations have implemented a more or less formal process.
Others assemble teams to respond to particular challenges and, less often, opportunities.
While there are as many approaches and roles for contingency planning as there are organizations, characterizing most is an initial focus on existing operations. In many respects, it is easier to start with well-understood cost drivers that can impact expenses.
Typical actions include curtailment of all non-essential business travel, cessation of new hires, and perhaps even a reduction in force. All of these, coupled with a detailed assessment of initiatives and a company-wide re-prioritization, can significantly impact the viability of the company.
When institutionalized and practiced as a core competency, contingency planning enables sustainable cost reduction and revenue optimization.
Inculcating this discipline at all levels helps organizations achieve best in class financial performance and enhance shareholder value.
By flexing financial planning and analysis (FP&A) tools and processes, organizations can implement the type of changes represented above.
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When organizations face financial and risk management challenges, these actions and others are often required. However, just as often, they are not enough. Frequently, leaders confront the need to seek deferral or elimination of spending by targeting strategic initiatives.
A typical FP&A focus is on overall budgeting, forecasting and analysis. The tools, systems, and processes deployed almost always lack the depth and context required to assess strategic initiatives across the investment life-cycle rapidly. Effective decision-making requires an end-to-end perspective to identify low value and non-strategic initiatives targeted for deferral or elimination.
Promptly pulling together appropriate analysis is frequently impossible, resulting in indiscriminate actions to meet a savings target without the context needed to evaluate individual projects, programs or portfolios.
Inpensa developed the first end-to-end investment governance platform designed to help executives make better decisions on the prioritization of strategic initiatives.
This unique perspective shines a light on the best practice approach for contingency planning, sustainable expense management, and impact on strategic initiatives.
Events in early 2020 were as unprecedented as they were unanticipated. Companies are under considerable and increasing pressure to establish a responsive contingency planning framework that rationalizes spend. Achieving this goal means hitting savings targets while minimizing the impact on go-forward operating results.