Ep. 171: Larysa Melnychuk - Modern FP&A Trends

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FULL EPISODE TRANSCRIPT:
Adam: (00:05)
Welcome back to Count Me In, IMA's podcast about all things affecting the accounting and finance world. This is your host Adam Larson, and I'm here with you again to preview another insightful conversation about financial planning and analysis. Here in episode, 171, Mitch spoke with Larysa Melnychuk about trends in modern FP&A. Larysa is a leading FP&A professional and influencer. She held senior roles at top organizations before establishing the international FP&A board in 2013, which has since expanded to 27 chapters in 16 countries across Europe, the Middle East, Asia, Australia, and North America. In this episode, she discusses how FP&A has evolved and explained some trends, including XP&A and digital FP&A. Keep listening to learn more as we head over to the conversation now.
Mitch: (00:57)
Larysa with your international FP&A board project and speaking with you previously, I understand you've traveled through many countries, 16 countries. There are 27 chapters for this project, across Europe, Asia, Australia, the Middle East, North America. You know, this is a wide covering project when it comes to the topic of FP&A. So you've obviously seen a lot. You've heard a lot. To start things off. I would like to first get your definition of modern FP&A, and how does it kind of vary across these different regions?
Larysa: (01:33)
Thank you, Mitchell. first of all, thank you for inviting me, to this podcast. It's especially pleasant, to talk about, trends and FP&A at the beginning of the year, when we all look ahead, in order to understand what is happening, with our environment and with our profession. So, there are really a lot of definitions, of FP&A from, different account and boards from, different practices, practitioners. The one that I really love, it came from one of our meetings and, it was the definition, very practical definition from my former CFO at Swiss Re in Zurich in Switzerland. This definition he shared at our meeting and, actually he shared that his company really adhere to this definition in terms of their FP&A, so he said that, FP&A helps to manage the value of the company by five different ways.
Larysa: (02:38)
First one is, helping to understand the value of the company, describing extraction steering, and reporting it to the key stakeholders. So fantastic definition that, really described, the strategic value of FP&A and how it helps to sustain the value of the company. Our FP&A trends definition that we checked at, 26, 27 different chapters in 16 countries around the globe. It's, that FP&A is a proactive force that helps to manage, the understanding of the business, the understanding of the value of the business. It supports a decision making process at different levels of organization, and also it integrate, organizational processes of strategic financial, and operational planning. It provides a critical, insights for the decision making. So this is my answer, what FP&A is.
Mitch: (03:41)
That's excellent. And thank you for sharing, you know, I think in today's business environment, as we really try to focus on our management accountants, right, the finance and accounting professionals, you know, that definition must be top of mind because as everything that they're doing, today on the job, it really needs to be adjusted, you know, if not totally transformed because of the direction the profession is going. So to follow up on your definition and what you've shared from your experience, what are some of the trends and potentially some of the challenges really that go along with modern FP&A, as you define and supporting the transition in the evolution of the management accountants role.
Larysa: (04:24)
First of all, the trends I defined, but this incredible business environment that we all experience. So, at the moment we are talking about applying and forecasting, in the environment of high uncertainty and what it means, it means that, our traditional management accounting methods, they're working only within this span of predictability, span where we can really, apply our, variance analysis method, one plan, one forecast. But, the problem, with a current environment is that the span of projectability is decreasing. So we really have to look at different methods, how we can plan and forecast, and make decisions under, uncertainty from this point of view, the first obvious, and very important trend that we observe, especially for the last two years, it's moving, not only to scenario planning, I would call this scenario management.
Larysa: (05:32)
So everything at the moment, it's, about looking at, futures and deciding what is going to work. And of course, organizations that are able, to play, scenarios very quickly, practically in real time at different levels of the organization, really, with analytical insights, those organizations are at the leading stage and they really are at a good place. We looked at many different case studies and interesting to see that, practically every organization at the moment are trying to be there. But though, in order for us to be, at this, stage when, scenario management works in agile manner, we really have to look at, the way how to achieve it and, those stages, those next trends that I would like to outline here. They definitely, those important trends that are needed in order to be at this scenario management stage.
Larysa: (06:36)
I would say that the second one and very important one, is driver based planning many would say, oh, we are talking about driver based planning. For many years, it's not the latest strength, but I would say that, at this particular environment we are talking about not traditional driver based planning, where you have all your defined and well known, drivers, but actually it's trying to look at those drivers, that, you never realize exist. And now we have to acknowledge that, they are helping us to define those drivers. So with help of predictive analytics, for example, we can define even behavioral factors, you know, how, behavior or expectations let's say of our customers will change the way how we do our business. So let's put it this way. A driver based planning that is at the next generation driver based planning that is based on identifying those key driver, 20% of drivers that can explain 80% of the results.
Larysa: (07:43)
And also those drivers that, we never knew they existed, and, a lot of things h...