Last week’s Brexit vote sent speculation soaring about what it would mean for the future. Yet while the decision to leave the EU may have taken pundits by surprise, forward-thinking CFOs know that the current business landscape demands considering all future scenarios.
In a climate marked by flux and volatility, the CFO role is evolving to better help companies seize new opportunities and tackle new challenges. Agile planning, sophisticated forecasting capabilities, and scenario planning have moved front and center, as CFOs consider the uncertain political climate and the possible tumult ahead.
In fact, strategic-minded CFOs are already casting an eye to the November calendar and proactively modeling what the U.S. election might mean for their businesses.
Bracing for the ballot box
One-third of CFOs report that the U.S. national election is a top concern, according to the Adaptive Insights CFO Indicator Q1 2016 report. Just as the Brexit had a short list of outcomes, the November election will almost certainly welcome either Hillary Clinton or Donald Trump to the Oval Office. But the impact of the vote could be wildly divergent and take months to unfold.
Analysts are clamoring to predict how Trump might affect the economy, taxes, and foreign trade—and thereby impact corporate earnings for companies big and small. For example, defense has consistently been a top priority for Trump, which would likely buoy the bottom line for companies in this sector that are prepared to jump on opportunities as they arise. In healthcare, Trump has called for the repeal of the Affordable Care Act and argued for interstate competition for the sale of health insurance. That scenario would bring huge disruption to the sector and beyond—and how companies plan for and react to that scenario is crucial to their competitive edge.
On the other hand, Clinton, if elected, would bring a raft of different scenarios that CFOs should plan for. She supports a national minimum wage hike, which would probably signal bad news for the fast food and retail industries but could have far-reaching impacts at companies of all sectors and sizes. CFOs who take a wait-and-see approach to such changes may see their company losing out in the talent war and race to automate some tasks. At the same time, a survey of 1,000 investors by TD Trade showed that the majority felt that Clinton would be better for the stock market than Trump. As one analyst said, “Many more on Wall Street support Clinton over Trump, because business doesn’t know what a Trump presidency would mean for the economy. And markets hate uncertainty.”
The promise of scenario planning
No matter which candidate assumes the office in November, those companies that have spent the coming months scenario planning will likely have a leg up on their competitors. That’s because scenario planning allows you to model potential changes in the future and better plan to have the capital, talent, and strategic goals in place to move as soon as the future unfolds.
When one of our customers, a global investment firm, began using scenario planning, the difference in speed was substantial. “The high level of data integrity within Adaptive allows us to confidently run scenarios and make more strategic, course-altering decisions much quicker,” said Jenny Quinn, vice president of finance at AGF Management Limited. “Everyone is more thoughtful about the numbers than before, which has helped us to conduct a deeper analysis of our business that really guides the direction of the company.”
Regardless of who wins the election, speedier decision-making and deeper analysis will help ensure your company has something to celebrate.
To learn more about scenario planning, read our whitepaper, “Using Scenarios to Plan for Tomorrow.”