This morning, I came across an excellent article from the UK’s Institute of Chartered Management Accountants. Written by two people from Capgemini Consulting, Enterprise Performance Management has some excellent points, but one gaping hole: a very significant omission that I will comment on at the end.
I thoroughly endorse and like these points:
- Even in the good times organisations can be caught out by the unexpected. Businesses that can’t respond in a controlled and profitable way will fall behind the competition and ultimately fail.
- Achieving financial forecasts takes more than luck and good foresight. It requires a planning model capable of detecting changes in customer demand and sales trends and then flexing the sales activities and production to secure the targeted financial result.
- Integrated business planning refers to the alignment of planning, budgeting and forecasting across an organisation’s key functions of sales and marketing, supply chain and finance. In executing this process effectively, an organisation can arrive at a planning result that fulfils its overall strategic goals.
- Integrated business planning is about understanding what makes money for your business and ensuring you are equipped to make profitable responses to both market changes and unexpected events. It starts with obtaining a good understanding of which channels, customers and products make money, not just in terms of direct margin, but full end to end costs.
- The benefits of getting the organisation pulling in the same direction, supported by reliable information, cross functional governance, technology and master data management, are substantial
What is the hole? What is the omission?
A four-letter word: RISK
Risk management has to be part of the integrated processes for business planning and then performance management. Risk management is how you consider and respond to uncertainty in the business.
If this article had included the risk management function as one that needs to be a core contributor to enterprise performance management, then I would praise it to the skies.
Have you integrated business planning, performance management, and risk management?