By Cenen Herrera
Writing from Chicago, USA
In many of the Boardroom discussions I have attended about the financial prospects of the organization, the review of financial performance reports had typically evolved around the complex scenarios prepared by the Chief-Financial-Officer (CFO). These financial scenarios are oftentimes loaded with examples that contain large amounts of asset/liability/equity/income/expense transactions which are sometimes up to six or even nine digits long. Even if these financial reports are rounded to the nearest thousand or million, I find them meaningless if they are not summarized into a "big picture" format. After all, Board discussions are strictly time-bound, and Board expectations are high that only the most significant items that strategically impact on corporate values, financial issues, operational challenges, administrative issues, and regulatory compliance should be discussed.
Scenario planning is an essential tool that CFOs undertake in their normal functions. The scenario planning exercise begins by evaluating the current results of operation using the company's decisive financial indicators. The CFO then coordinates with marketing and operational functions to determine the short and long-term prospects of the organization. Assumptions are then used as inputs for the scenario planning exercise. The important findings of these planning scenarios are then brought by the CFO to the attention of the Board. As the CFO is primarily charged with the management of the company's financial resources, the CFO's responsibility is heavily focused on providing the Board with a dynamic financial framework that could achieve the mission of the organization.
Rolling financial reports, e.g., rolling financial budget, rolling financial forecasts, rolling risk assessments, rolling marketing goals, rolling operational targets, have become the most sought after reports by the Board in its periodic review of the company's performance. To help the Board understand the complexity of these reports, the CFO should find a simple way of explaining the findings of these reports. At the end of the day, the Board heavily relies on the judgment of Management and the CFO's stewardship role in crafting the future direction of the company.
Writing from Chicago, USA
In many of the Boardroom discussions I have attended about the financial prospects of the organization, the review of financial performance reports had typically evolved around the complex scenarios prepared by the Chief-Financial-Officer (CFO). These financial scenarios are oftentimes loaded with examples that contain large amounts of asset/liability/equity/income/expense transactions which are sometimes up to six or even nine digits long. Even if these financial reports are rounded to the nearest thousand or million, I find them meaningless if they are not summarized into a "big picture" format. After all, Board discussions are strictly time-bound, and Board expectations are high that only the most significant items that strategically impact on corporate values, financial issues, operational challenges, administrative issues, and regulatory compliance should be discussed.
Scenario planning is an essential tool that CFOs undertake in their normal functions. The scenario planning exercise begins by evaluating the current results of operation using the company's decisive financial indicators. The CFO then coordinates with marketing and operational functions to determine the short and long-term prospects of the organization. Assumptions are then used as inputs for the scenario planning exercise. The important findings of these planning scenarios are then brought by the CFO to the attention of the Board. As the CFO is primarily charged with the management of the company's financial resources, the CFO's responsibility is heavily focused on providing the Board with a dynamic financial framework that could achieve the mission of the organization.
Rolling financial reports, e.g., rolling financial budget, rolling financial forecasts, rolling risk assessments, rolling marketing goals, rolling operational targets, have become the most sought after reports by the Board in its periodic review of the company's performance. To help the Board understand the complexity of these reports, the CFO should find a simple way of explaining the findings of these reports. At the end of the day, the Board heavily relies on the judgment of Management and the CFO's stewardship role in crafting the future direction of the company.
