Your next finance hires must be comfortable with modeling and can't just be proficient number crunchers, CFOs said in an Argyle Digital finance leadership webcast.

The pandemic has accelerated the need for analytical-minded finance staff because without people who can incorporate internal and external data, including macroeconomic data, and use AI and other predictive analytical tools in forecasting, organizations will founder, said Nayab Siddiqi, CFO of travel technology company REZY360.

"Someone who can't connect the macroeconomic events to the financial impact would not be able to deliver [on expectations]," Siddiqi said. "If someone doesn't understand risk, probability, and statistical techniques, they won't be able to create scenarios and translate those into probabilities."

Scenario planning

Given today's uncertainties, you need to look at multiple scenarios to really cover your bases, said Sara Baxter Orr, head of global CFO practice for financial software company Anaplan. "We basically run seven or eight plays of what could possibly happen," she said. "You start to build this competence and you get better and better at it. It doesn't have to be scary or something a data science team does in the back room."

COVID has made the financial planning and analysis (FP&A) function the hub of the continuous planning that organizations must do to survive today, said Orr.

"Finance teams are at the epicenter of this," she said. "You take the strategy that goes into the finance plan and then into the operating plan and you get those synced up."

The days of creating a static budget and annual operating plan are over, she said. Organizations today have to do continuous planning, using a rolling forecast that updates with as close to real-time data as possible from the organization's business units. 

"The one thing we know about our annual operating plan is it's always wrong," she said. "Just pick a month — October. That's your annual operating plan. Then just keep going, because things are moving at such a rapid pace. The more you can roll your forecast, the more you might be better at predicting the future."

Orr uses an 18-month time horizon in her forecasts; the longer period helps with long-term planning by picking up trends long before they become problems. "It gives you alerts if there's a risk," she said.

Qualitative skills

Analytical competency isn't the only finance skill new-hires need; they must be comfortable working with other functions within the organization so they can understand the business from these other points of view and incorporate that into the financial plan. 

"It comes down to two things," said Kenny Cheung, chief of procurement at the World Bank Group. "Strong communication and change management — how do we implement the operating plan consistently across the organization? They need that comfort level."

The increased need for analytically-skilled staff with a broader vision of the organization is part of the long-term shaft among FP&A teams away from backwards-looking analysis of internal data to forward-looking planning, Siddiqi said.

"Basing numbers on historical trends was very simplistic," he said. "Now we're going deep into different scenarios."

In the travel industry, for example, companies used to track the number of people traveling and average cost per trip. Today, that data is just the start.

"Now you're looking at cross-border travel, business travel, even going down to the city level," he said. "How many people are going to certain types of hotels? What is the leisure division doing? What is the business division doing? That's a much deeper analysis and that's the only way to go forward."

The acceleration in finance teams undertaking deeper analytical work is one of the beneficial impacts of the pandemic. "It's coming out of a negative event, but it's moving us in a positive direction," Siddiqi said.