# Four steps to mastering financial agility  Author: Pal Sinha, Barnali Author URL: https://financedigest.com/author/pal-sinha-barnali Published: 2021-01-12 Category: FINANCE Category URL: https://financedigest.com/category/finance Meta Title: Mastering Business Agility: Four Key Elements for Finance Meta Description: Learn how finance teams can enhance agility through scenario modelling and cash position stress-testing, to make informed decisions and navigate uncertainty. URL: https://financedigest.com/four-steps-to-mastering-financial-agilityhtml ![undefined](https://prod.superblogcdn.com/site_cuid_cm5qst7v3003gwirgwqtxn8i8/images/storyblocks-financial-manager-analyzing-charts-and-graphsr87bvtn6wm-scaled-1736838649846-compressed.jpg) _By **Tim Wakeford,** Vice President Product Strategy, EMEA Financials at [Workday](https://www.workday.com/)_ Agility is fast-becoming priority number one for finance teams, as companies ride the storm of the ongoing pandemic. Almost a year in, businesses are adjusting processes and trying to align their people in order to react quickly enough to 2020, and soon 2021, uncertainty. Yet for the finance team and CFO, defining and embracing agility is easier said than done. Not only are financial leaders, and their teams, operating under extreme pressure they also have all eyes on them to steer the company to survival — leaving little room for errors. They know they [must make changes](https://www.financedigest.com/developmental-best-practices-must-change-to-ensure-the-post-pandemic-recovery-of-financial-services.html "Developmental best practices must change to ensure the post-pandemic recovery of financial services") to the way they work, and fast. The question for many is, where can they gain the most agility with minimal risk and disruption? Outlined below, is a guide to four specific elements that I believe — through many conversations with clients —  [finance teams](https://www.financedigest.com/finance-teams-using-ai-outperform-peers-as-demand-for-skills-grows.html "Finance Teams Using AI Outperform Peers as Demand for Skills Grows") must embrace to master business agility. 1. **Perform Continuous ‘What If’ Scenario Modelling** In today’s climate, it’s no secret that annual plans are outdated before they are even approved. Financial scenario modelling, however, can help finance teams make fast and accurate decisions in response to rapidly [changing market](https://www.financedigest.com/sterling-little-changed-after-mixed-labour-market-data.html "Sterling little changed after mixed labour market data") conditions. In fact, [McKinsey states](https://www.mckinsey.com/business-functions/strategy-and-corporate-finance/our-insights/no-longer-on-autopilot-lessons-for-cfos-from-covid-19) that finance leaders should focus on three or four independent scenarios that reflect short-term and long-term revenue and cost outlooks. In order to be successful, each scenario should have a perspective on the length of [economic uncertainty](https://www.financedigest.com/combatting-economic-uncertainty-in-2023-with-the-payments-sector.html "Combatting economic uncertainty in 2023 with the payments sector"), the depth of the potential decline, and the ramp-up to the next normal. Whilst also [accounting for nuances across](https://www.financedigest.com/flooded-battery-to-remain-top-choice-across-industries-accounting-for-49-0-of-lead-acid-battery-sales-in-2021-future-market-insights.html "Flooded Battery to Remain Top Choice across Industries, Accounting for 49.0% of Lead Acid Battery Sales in 2021: Future Market Insights") countries or regions and the impact of sector specific events. This practice provides finance teams with scenario clarity and the opportunity to compare the outcomes of certain decisions. This, in turn, will help them to take a more agile and flexible approach to operations. Sitting at the heart of this approach, is [real-time data](https://www.financedigest.com/how-real-time-data-innovation-is-driving-up-customer-experience-in-fintech.html "How real-time data innovation is driving up customer experience in fintech"). Finance teams must use real-time data to analyse [key drivers](https://www.financedigest.com/packaging-and-textile-industries-key-driver-for-digital-printer-market-demand-2021.html "Packaging And Textile Industries : Key Driver For Digital Printer Market Demand 2021") in specific scenarios. From [selling prices](https://www.financedigest.com/stocks-jump-as-treasury-yields-ease-and-oil-prices-sell-off.html "Stocks jump as Treasury yields ease and oil prices sell off") through to productivity, driver-based models that incorporate a range of financial and operational data points enable organisations to run the holistic ‘what if’ analyses necessary to support critical and timely decisions. By using [data in this way](https://www.financedigest.com/three-ways-data-unlocks-business-value-for-financial-organisations.html "Three Ways Data Unlocks Business Value for Financial Organisations "), scenario modelling becomes a financially agile process that helps stakeholders gain insights and make informed decisions tied to strategic and operational goals. 2. #### Stress-Test Your Cash Position One of the finance team’s [top priorities](https://www.financedigest.com/why-intelligent-automation-should-be-a-top-priority-for-enterprises-in-2022.html "Why Intelligent Automation should be a top priority for enterprises in 2022") during uncertain times is maintaining a stable cash position, after all ‘cash is king’. During times of crises, finance teams reluctantly depend on liquidity, raising additional capital, or cutting [costs to offset reduced](https://www.financedigest.com/simple-ways-to-reduce-business-costs.html "Simple Ways to Reduce Business Costs") income. The challenge is that gaining a view of a [company’s cash position can be difficult when cash controls are weak and visibility over cash is limited](https://www.financedigest.com/why-it-pays-for-companies-to-hold-physical-assets-in-separate-limited-companies.html "Why it pays for companies to hold physical assets in separate limited companies"). For most organisations, achieving full insight into their liquidity would require a great deal of manual effort and reconciliation, which [becomes a real barrier to financial agility](https://www.financedigest.com/becoming-agile-starts-by-moving-to-the-cloud.html "Becoming agile starts by moving to the cloud"). The finance team, therefore, [must invest](https://www.financedigest.com/true-operational-resilience-must-include-investing-in-esg.html "True operational resilience must include investing in ESG") in tools that will help it gain full visibility across all disparate cash sources to get real-time insight into their cash position. It’s only when they have this, that a [finance team can plan for multiple scenarios as they come up and manage the business’](https://www.financedigest.com/business-finance-the-fintech-evolution.html "Business finance: the fintech evolution") liquidity in the near, medium, and longer-term. Embracing this [cash flow strategy means finance](https://www.financedigest.com/should-your-business-reconsider-invoice-financing-top-tips-on-why-reappraising-this-method-liberates-business-cash-flow.html "Should your business reconsider invoice financing? Top tips on why reappraising this method liberates business cash flow") teams can be more agile, setting aside funds for critical business needs and unexpected challenges. 3. #### Optimise Your Supply Base Beyond cash flow and liquidity, finance teams must also take a closer look at the agility of their supply base. Procurement is unable to execute effective contingency plans and generate immediate [business impact](https://www.financedigest.com/how-technology-consultants-impact-business-growth.html "How Technology Consultants Impact Business Growth") if there is a lack of insight into supplier relationships. Sourcing teams must first determine who their best strategic [partners are and then increase alignment and collaboration to better manage](https://www.financedigest.com/impact-com-named-a-market-leader-in-research-in-actions-partner-management-automation-report-and-in-g2-winter-reports.html "impact.com Named a Market Leader in Research in Action’s Partner Management Automation Report and in G2 Winter Reports") the supplier community. With the partners identified, sourcing leaders can work with their suppliers to reach mutually beneficial solutions like renegotiated minimums or extended payment terms. Using real-time collaboration technology, such as team chat, document-sharing, and video conferencing, enables sourcing teams to create a community, building strong relationships, as well as a more agile approach to the supply base. 4. #### Quickly Implement Policy and Program Changes Business agility is determined by an organisation’s ability to move its two most valuable assets, [people and money](https://www.financedigest.com/more-than-twice-as-many-consumers-trust-customer-reviews-over-companies-themselves-according-to-research-from-smart-money-people.html "More than twice as many consumers trust customer reviews over companies themselves according to research from Smart Money People"), to where they are most needed. To manage these assets successfully, organisations have to be ready to support their employees as circumstances change and switch [business direction in real time](https://www.financedigest.com/the-role-of-invisible-real-time-payments-in-fueling-the-future-of-cx-in-business.html "The role of invisible, real-time payments in fueling the future of CX in business"). This requires agile IT infrastructure that can pivot at a moment’s notice. For businesses bound by legacy systems, many of these changes— such as amending workflows, [changing reporting](https://www.financedigest.com/u-n-climate-change-report-sounds-code-red-for-humanity.html "U.N. climate change report sounds ‘code red for humanity’") dimensions, organisational structures, and payroll — require the intervention of the IT department. These potentially time-consuming, complex IT projects are both resource-sapping and frustrating. Finance teams, therefore, must be [able to make fast changes within their system](https://www.financedigest.com/emerging-risks-is-our-insurance-system-able-to-cope.html "Emerging risks: is our Insurance system able to cope?"), using real-time data to analyse and report actions in the business–without the need of IT support. Even for forward thinking companies like Netflix, there are always improvements to be made to back office processes. While it is a leading [digital platform for people across the world](https://www.financedigest.com/six-reasons-why-digital-world-classtm-finance-organizations-outperform-peers.html "Six Reasons Why Digital World ClassTM Finance Organizations Outperform Peers"), its back office systems had usability challenges due to clunky workflows and limited visibility. Netflix invested in Workday to transform the [back office](https://www.financedigest.com/google-mandates-workers-back-to-silicon-valley-other-offices-from-april-4.html "Google mandates workers back to Silicon Valley, other offices from April 4") into one unified system, and introduced an agile mindset across the business. This resulted in more efficiency, and fewer silos between the IT, finance and HR teams. For example, everytime Netflix has an original show or new original movie, it has to create a [legal entity for that company and set up the banking](https://www.financedigest.com/russian-central-bank-gives-legal-entities-green-light-to-trade-foreign-shares.html "Russian central bank gives legal entities green light to trade foreign shares") for this. Now, this takes a matter of minutes for legal and finance to set up and add to its consolidated framework. In turn, finance teams can turn what can be a long and complex process into a fast and agile setup. 5 **. Agility is a necessity, not a luxury** The uncertainty the pandemic has brought to 2020 has made [finance leaders reconsider their strategic](https://www.financedigest.com/now-is-the-time-for-finance-leaders-to-take-on-a-more-strategic-and-valuable-role.html "Now is the time for finance leaders to take on a more strategic and valuable role") and organisational agility. For some, the need to become more agile has been an opportunity to enhance operations and processes. For many, this has been a forced change that is needed for survival in a [climate](https://www.financedigest.com/insurers-must-reimagine-traditional-risk-models-to-adapt-to-climate-change.html "Insurers Must Reimagine Traditional Risk Models to Adapt to Climate Change ") of constant change. No matter how your business has survived up to this point the CFO, and the finance team, must now put financial agility and real-time insight at the [top of the agenda if the business](https://www.financedigest.com/top-business-trends-in-2022-for-cybersecurity.html "Top business trends in 2022 for cybersecurity") is to recover rapidly in 2021. --- This blog is powered by Superblog. Visit https://superblog.ai to know more. ---