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Oliver Wight Blog

The Role of Finance in IBP: Part 3 - Answering the Five Questions

By Mike Reed, Partner at Oliver Wight Asia Pacific

13 February 2018

In our previous blogs (parts one and two), we covered how finance is placed within an organisation’s structure and the core roles of finance that contribute to the success of Integrated Business Planning (IBP). Part of this success is down to review meetings. They are an opportunity for key leaders in the organisation, including those in finance, to review, present and communicate change. The meetings should not just be a series of discovery meetings but a continuous process of orchestrating positive development. The key thing is to ask the right questions in order to acknowledge plans and then plan accordingly. In Part Three, we look at the ‘Five Key IBP Questions’ and how the finance team is integral in providing a response.

The review process
Firstly, review meetings should be diarised from the outset of the year and those involved must prioritise those dates – nothing should be more important; after all, this is the management process running the entire business.

In reviewing your process, key assumptions supporting each part of the plan need to be understood, any changes from previously agreed plans acknowledged and the implications of these changes identified. Action plans also need to be agreed to support the business over a 24-month horizon – this part is essential.

The ‘Five Key IBP Questions’
A few years ago, Oliver Wight developed the concept of the ‘Five Key IBP Questions’ – simple ‘must-haves’ which can be applied in any organisation and which can be used in each IBP review meeting. These questions address the key issues facing the business in a standardised way, so plans can be validated and the necessary decisions made. The finance team has a vital role to play in answering them and can offer an enormous insight into commercial issues and successes to the rest of the company.

When faced with Question One, ‘How are we performing now?’, it is finance’s responsibility to present and report on current financial measures and provide an understanding of the indication of said measures. Naturally, all departments will answer the same question too, but it is the finance team in particular that will really shed light on the real numbers and highlight shortfalls to the plan assumptions made in previous months.

The other four questions that are covered in review meetings are equally enlightening. Question two ‘Is the new plan valid?’ allows the finance team to provide supporting analysis of key assumptions made.  Question three ‘Is the plan enough?’, is a hard-hitting but necessary question that gives finance the opportunity to address the difference in current financial outcomes and previous financial results before the business improvement process was implemented. This is also allows them to understand any shortfalls within the business. Finally, question four ‘Are there any Vulnerabilities or Opportunities?’ provides finance, and all other departments, with a chance to complete “what-if” analysis and scenario modelling – useful exercises that will ensure the business is prepared for any hypothetical situation.

Review meeting etiquette
Senior leaders chairing the key IBP review meetings need to see information being presented in a business-like and commercial way and this information needs to be ‘decision-grade’. The Finance Business Partner helps by ensuring that the financial implications of the Five Questions are properly presented, in a consistent and easily digestible fashion, cementing finance’s integral role in a successful IBP process.

In our final part, we look closer at the different review meetings and the role that finance should play in each element.

For more information on the role of finance in IBP, read our latest white paper here