CFOs are Leveraging Artificial Intelligence and Macroeconomic Data to Manage Uncertainty
Finding New Value from External Data and Machine Learning Algorithms
CFOs and FP&A professionals are moving beyond the early adopter phase of machine learning solutions, and incorporating predictive AI into their planning processes.?New classes of intelligence and algorithms are enabling financial management to ‘future proof’ their strategic plans and forecasts.
Future proofing is essentially the ability to predict, plan and then protect the outcomes of business decisions.?All organizations formulate strategies and plans based on forecasts and predictions of what will happen to their business – it is a fundamental and critical aspect of operational success.
Organizations predict and forecast what is likely to happen to their various lines of business over the short, medium and longer terms.?For example over the next 12 months an organization might:
As we all now realize, COVID has been the root cause of a tremendous amount of market and economic volatility, much of it beyond the control of individual organizations. From inflation, to rising material costs, to supply chain disruption, to changing consumer mobility, to staffing shortages, all of these are likely have a negative or positive affect on business forecasts and plans. Or not.?Some businesses are less impacted than others, some positively, some adversely.
If you don’t credibly identify which economic and industry drivers impact each of your lines of business, and then quantify and incorporate them into your predictions and plans, you are basically trying to run a business with a blindfold.
How to Manage Uncertainty
There is now a new way to manage uncertainty, leveraging AI and a 3 step process.?This might initially appear daunting, but not with the right tools.
Step 1 – Identify Indicators
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Step 2 – Build Models
Step 3 – Monitor for Change
Predictive AI practices and algorithms provide a scalable and systematic way to apply external and global data within economic based models to provide accurate forecasts for either an organization’s business performance, or even the total projected business for a market segment.
At Prevedere, we help businesses move from the early adopter phase of predictive AI to operationalizing market validated forecasts.?Creating this intelligence internally with a data science team can take months, even years.?We provide a?model-ready economic data repository, a predictive AI modeling platform, and a team of data scientists and economists who can advise and interpret the impact of economic volatility on your business.
A CFO at Kraft Heinz recently stated: “All retailers and CPGs should consider macroeconomic factors to improve their business planning. Not only will forecasting accuracy improve, but go-to-market planners will be fully educated as to what external factors are important to their markets.”
Read more about Kraft-Heinz’s use of AI and macroeconomic data?HERE.
Thanks for your time today.
Andy McCartney