What do you do if embracing innovation in budgeting and forecasting poses potential risks and benefits?

Risk assess is typically done as a high level company perspective. You move forward as the net gains outweigh the risks. The issue is risks existing at a lowest levels are different than a Corporate level. The output must be geared to the bottom level & then summarized as the levels go higher. Not assessing the risks from the lowest level is the typical mistake. If the process works at the lowest level, it can always be summarized as it rolls up, but the process designed to only deliver high level info will not have enough details to make it effective at the lower levels. Budget and forecasting make impacts when details are at the level where $’s are spent. Design the process at that level with the ending metrics being math from detail.

Sometimes something "new" creates unintended problems, sometimes these problems or consequences are not found out until the cycle is complete. In my experience, its best to study what is working well, what should be changed (which usually is prompting the desire for the new method or system) and thoroughly assessing the opportunities and risks with the new method or technology.

Establishing a risk tolerance and assessing risk while evaluating innovation is crucial. In finance, like any industry, there needs to be room for "safe experimentation." However, finance presents a unique challenge where failed experiments can lead to significant financial losses. Therefore, careful risk assessment is vital. However, this should not scare us to not want to explore innovation, it's important to explore new technologies, which can help us be more efficient. One way to safely experiment is to always integrate new ideas with existing processes. And only fully adopt them after thorough testing and validation for accuracy.

In addition to conducting a risk assessment, consider the importance of stakeholder involvement in the decision-making process. For instance, involve representatives from IT, finance, and other relevant departments in evaluating new budgeting and forecasting technologies. By soliciting input from key stakeholders, you gain valuable insights into potential challenges and opportunities, ensuring that the chosen solutions align with organizational goals and requirements.

Well, it's like navigating a double-edged sword, isn't it? On one hand, embracing innovation in budgeting and forecasting can open up a world of opportunities. You might uncover more accurate predictions, streamline processes, and adapt more quickly to changing market conditions. But, on the flip side, there are risks to consider too. Implementing new technologies or methodologies can be costly and time-consuming. There's also the chance of unforeseen errors or disruptions to existing workflows. It's all about finding that balance between embracing the benefits while managing the risks.

A Company in Riyadh faced challenges with outdated financial planning. To address these issues, I advised them to adopted a cloud-based platform designed to improve accuracy and agility. While the team acknowledged risks such as implementation challenges and data security concerns, despite initial hurdles, such as data migration issues and employee resistance, the platform proved successful. The company became more agile, accurate, and competitive. This experience demonstrates the importance of balancing risks and rewards when embracing innovation. By carefully considering potential challenges and benefits, companies can make informed decisions that lead to significant improvements in their financial performance and competitiveness.

Beyond real-time data analysis, heightened accuracy in financial projections, and swift adaptation to market changes, innovation can also foster greater collaboration among team members, leading to more cohesive decision-making processes. Additionally, innovation often enhances transparency and accountability within the financial framework, instilling trust among stakeholders.

One aspect I found particularly useful in the text is the balanced perspective presented between risk assessment and the pursuit of innovation in financial processes. While it's crucial to consider the risks involved in any change, it's also essential to recognize the potential benefits of innovation. The ability to conduct a weighted analysis, comparing the benefits of innovation to the identified risks, is crucial for making informed and strategic decisions in the financial environment. This underscores the importance of adopting a holistic approach to risk management and seeking opportunities for improvement in a company's financial processes.

I am an authentic optimist, benefits first then risk assessments. I would flip 1 & 2 around. Why do it if the risks are in your immediate vision rather than the benefits ?

Based on my experience, I recommend to develop & deploy innovation prototypes in tranches and undergo a parallel run supported simultaneously by user-testing procedures before pushing such innovations into production. It’s critical to have a regular catch-up with target audience, bake in the feedback and fine-tune the new tool/process before formally rolling out. Risk Management (accuracy, timelines, accessibility) is a critical element to be considered on an on-going basis. Post implementation training & query redressal leads to a better pervasive adoption of any new innovation.

I always advocate for a cautious yet proactive approach through pilot testing. Selecting a small, manageable segment of the organization to implement the innovative solution allows us to closely observe its impact, gather direct feedback, and fine-tune the process. Such a controlled environment minimizes risk exposure while providing valuable insights into the practicality and scalability, ensuring a well-informed decision regarding its broader application can be made.

Innovating in budgeting and forecasting can be a game-changer for organizations, but it's essential to proceed with caution. Pilot testing is a crucial allowing you to assess the feasibility and impact of the innovation on a smaller scale. Here are some points to consider: - Strategic Alignment - Clear Objectives - Engage Stakeholders - Data-Driven Approach - Iterative Process - Risk Management - Communication - Evaluation - Scalability - Continuous Improvement This can help in non disruptive environment for existing operations while allowing you to migrate to the new innovations with positive results.

One thing I found particularly useful in the text is the recommendation to implement a pilot test for innovative solutions if the benefits outweigh the risks. This strategy allows for a smaller-scale evaluation of effectiveness before full-scale implementation throughout the organization. During this phase, closely monitoring performance, gathering user feedback, and making necessary adjustments are critical. This approach ensures that the innovation delivers on its promises without disrupting current operations, ultimately minimizing potential financial risks.

One useful aspect in the text is the recognition of the need for training when implementing new budgeting and forecasting tools. Training ensures that the team can effectively utilize the innovations. Providing comprehensive training sessions and ongoing support helps them adapt to the new systems. This not only facilitates a smooth transition but also empowers the team to leverage all the features of the innovative tools, potentially leading to better financial outcomes for the company.

This is the section that holds the most weight, in my opinion. We all (people and businesses) are guilty of buying new technology, failing to learn it and never experiencing its full potential. How many apps did you buy and never use? How many SaaS systems are you using at half its capacity. The training time and energy will be the point that brings your ROI faster.

I would like to ask the community what they use other than Excel ? Looking for a fairly robust tool but without having to keep figuring out the formulas someone else used and then ending up redoing it my way ??

A systematic process for ongoing evaluation needs to be in place. By defining clear KPIs related to the new budgeting and forecasting systems' effectiveness and efficiency, we can continuously assess their impact on our financial operations. This ongoing review process is essential for optimizing the tools and remaining adaptable in rapidly changing environments.

Continuous review is very important. But, how to review? Review what? Very hard to set up. For example: Is the sales revenue and GP generated by new products good KPI? On the other hand, an innovation, even generate no sales revenue but prove this technical direction cannot go through in our compnay, still vey useful to Management that donot invest source into this direction. This will save money, a lot. Therefore, must be careful to choos KPIs to review innovation continuously.

Things are so fast moving I feel like it would be nice to get AI involved here to feed in new info every day. Things like BLR, interest rates, inflation indicators…. Also internal movements

Innovation through use of technology should evolve for any organisation starting from creating business insights to then business optimisation & monetization. The ability to create usable & reliable business insights serves as a pilot test to build further on such innovations.

One useful aspect in the text is the emphasis on keeping an eye on emerging trends and technologies that can further enhance budgeting and forecasting. Staying informed about advancements in artificial intelligence, machine learning, and data analysis can prepare you for future innovations. By planning for these developments now, you can ensure that your financial planning remains robust and agile in the years to come. This proactive approach can help the company adapt quickly to market changes and maintain its competitive edge.

One thing which is quite crucial in today’s planning and forecasting is - performance tracking and focusing on right KPIs so as to ensure improvement. Moreover Story building and storytelling approach should be as accurate and incorporated properly and accurately into our Forecasting and Quantitative models. On the final note I would like to say that Leaderships and CFOs have to helped to make some crucial strategic decisions for which their teams must provide them the right health of the P&L of the firm, and also implement a detailed Pareto as to what materiality can bring about sustainable growth and Continuous improvement

i understand that forecasting and budgeting are the tools for making the future safe and relevant. correct forecasting and budgeting is very helpful in growing. It is very important that innovations is used here as embracing innovation help in getting the correct forecasting and budgeting. one need to get ensure that potential risk in inculcating innovation are identified assessed and treated. by using proper risk management tactics, one may deal with the risk in embracing innovation at the forecasting and budgeting and make budgeting and forecasting more trust worthy, result oriented and meaningful. Herein zero base budgeting and agile forecasting should be used so that the past inefficiencies are removed