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Organizations like yours are aware that with any venture, there comes a certain amount of risk. Sudden-seeming shifts in the market, internal process breakdowns, an increased presence of market disruptors, and even external threats like cybercrime must all be factored into your organization’s plans for the coming year. Only, assessing and appropriately accounting for the wide variety of risks that are out there is next to impossible without forecasting capabilities.

Your risk management team’s goal is to build an appropriate amount of operational resilience in your organization. Part of fulfilling that responsibility is compiling an accurate forecast. Whether your team is crunching the numbers by hand or using an automated tool to supplement their information gathering, financial forecasts are a vital tool that facilitates communication and collaboration between your finance and operations divisions. In this article, we’ll dive deep into the benefits of financial forecasting, outlining how accurate forecasts encourage collaboration across departments, unlock advanced risk management, and support leadership throughout the decision-making process. 

Enhancing Strategic Alignment

Firstly, let’s explore how financial forecasts unite departments toward a single goal: a profitable year for your organization. Financial forecasts are a central component of the organizations’ financial planning capabilities, a shared vision that includes and incorporates all known elements of risk. Without that shared vision, your finance and operations departments will be working with fragmented information; and often, at odds with each other. 

Different departments often work within their own siloed tech stacks, meaning they aren’t sharing information or communicating with one another directly as often. With vital information being locked in these silos, leaders cannot make accurate decisions and may find one bad decision snowballing into a significant loss in profits. The ensuing struggle to mitigate the damage often devolves into finger-pointing spreading low morale throughout the organization and possibly increasing employee departures.

Without a shared single source of truth between departments, each will act in the way they believe is best suited to the company. As each works towards a different purpose, those purposes will eventually conflict; resources will be unaccounted for or misused, leaders will bicker and snipe at one another, and employees’ day-to-day will be rife with confusion and frustration. This cascading chain of events can and will open up businesses to entirely new risks if left unaddressed.

Coming together on a single operational plan powered by a shared financial forecast is how you resolve this divide. Cloud accounting is an effective tool in this regard, as it replaces those siloed sources of information with a shared single source of truth. Everyone can access the financial plan, information is directly integrated and accounted for in the existing forecast as it comes in, and departments can communicate effectively sharing the same data.

Unlocking Effective Risk Management

Similarly, advanced financial forecasting capabilities can be used to unlock visibility into risks, especially during troubled financial times. 

Even the most accomplished risk managers cannot hope to sift through the piles and piles of market data manually and draw actionable conclusions – at least, not at the rate where those conclusions would still be useful. In addition to the large quantity of raw data that would need to be cleaned and organized, manual research cannot hope to keep up with market shifts in real-time. Instead, it is almost solely reliant on identifying trends in historical data.

So the question becomes this: how can your risk management department unlock agility and respond to rapid shifts in market or circumstance, without this excessive amount of effort and manual labor? Technological tools can help you navigate financial uncertainty and provide the appropriate support to construct an operational risk management framework. This is unlocked via:

• Process automation: Reports that would take your risk management team a considerable chunk of time to assemble are automatically generated by these systems, allowing you to significantly cut the time from reporting to decision-making. 

• Real-time financial reporting: Businesses that use financial analytics software gain the capability to track market shifts and adjust their financial forecasts in real-time. Incoming data is imported, analyzed, and adjusted for instantaneously, allowing your decision-makers to tweak your organization’s financial plan to account for emergent risks.

• Interdepartmental collaboration: Similarly to cloud computing software, these tools are accessible across departments, meaning everyone has access to both the incoming data and financial forecasts. Leaders from finance and operations can communicate and collaborate on revising the organization’s financial plan through this shared platform, unlocking a more efficient decision-making pipeline and faster conflict resolution.

Advancing your financial forecasting capabilities allows you minute-to-minute insight into market shifts and emergent risks, and allows your teams to collaborate on mitigating them within an effective risk management framework. With access to a single pool of deep market insights, your risk management team will be able to perform its role with aplomb – while also empowering your other departments to strive for success.

Conclusion: Supporting Informed Decision-Making

Nothing is more frustrating as a leader than getting conflicting reports from finance and operations when decisions need to be made. For you, the decision-maker, the above benefits of consolidating teams and unlocking clear risk analysis synthesize into one: the power to make measured decisions that push your company forward. 

With accurate financial reporting, seamless collaboration between teams on plan and budget revisions, and risks accounted for throughout, you will have all the tools at your disposal to make profitable, future-forward decisions for your company’s growth. All are unlocked by advanced financial forecasting capabilities, and a small suite of back-end improvements to support it.