Duncan Moore, CFO, Pemberstone Group, outlines the importance of gaining trusted medium-term insight to support the business through uncertain times ahead.
The current underlying trading position in the UK is good, with many companies, especially in manufacturing, exploiting the weak position of Sterling to boost exports. However, from Brexit to interest rate policy and geopolitical uncertainty, there are a number of events on the horizon that make the medium to longer term outlook look a little less positive.
The implications of sudden change were demonstrated powerfully with the crash of Sterling post Brexit. For one of the companies in the Pemberstone Group, which imports products in from China, the sudden rise in import costs presented a real challenge. The business needed product level knowledge to understand granular profitability and the viability of product specific price rises. At the time the company was running largely on anecdote, so a project was put in place to deliver that granular level insight, supporting targeted price rises that returned the business to profit.
For CFOs there are clearly two information categories – information regarding how the business has performed in the very near past, and forward-looking information. Businesses today should be able to believe their historic information is both robust and sufficiently detailed. It is all about forward looking at the moment and how a CFO can adjust forward views, budgets, forecasts, and sensitivities that might be caused by Brexit et al. Businesses need to be looking more to the future with reporting now rather than historical data.
Of course, across our portfolio some companies have better quality data than others. But I don’t see that as a challenge – where there are issues they can be addressed; and creating better quality data should be a given as part of a CFO’s day to day job. It may be stating the obvious to say companies need to have trust in current data and in near term historic data, but that is something that should be easily within your gift – it is all about how you run your businesses.
At Pemberstone, we work very closely with the management teams of our operating companies. We are constantly probing, constantly evaluating information that comes out of the businesses and therefore where we perceive a weakness that is commercially relevant, we will work with the teams to address that weakness.
When it comes to investing in the right reporting solution, those companies still reliant upon spreadsheets rather than integrated solutions need to undertake a cost benefit analysis. How much do you know about the business? How much do you need to know? At what level of granular information? A CFO needs to have a reporting suite that is flexible, yes, but also the ability to take the core information and layer on that forward planning, what ifs, projections and sensitivity analysis.
The future is increasingly uncertain, and CFOs need clarity regarding the medium-term outlook to support investment decisions; and that means combining trusted data with excellent forecasting tools, including sensitivity analysis.