The transformative power of financial forecasting is reshaping the way businesses and individuals navigate the economic landscape. Characterised by scenario planning, driver-based modeling, and the leveraging of advanced analytics, effective financial forecasting represents the next stage in the evolution of financial management. Many organizations are keen to adopt these strategies to build resilience and agility in the face of uncertainty.
 

Yet, despite the excitement and opportunities, there are still some barriers on the path to implementing these cutting-edge forecasting approaches. RSM's experts discuss the driving forces behind this shift and the challenges that lie ahead.
 

The driving factors for adopting advanced financial forecasting.


According to Rakesh Pardasani, Partner at RSM, "Approximately 50% of companies are actively working on implementing advanced financial forecasting, while the rest are using traditional methods or are still in the planning stage." 

As with any business, the minimum requirement to stay afloat is keeping pace with competitors, and growth comes from exceeding those requirements. Many organizations are feeling the pressure to make the shift in order to improve their decision-making capabilities.


The benefits do not stop there; Pardasani continues, "Advanced financial forecasting will also help organizations meet evolving business demands for agility and also combat uncertainty. Moreover, it helps organizations stay competitive by fostering proactive planning and cost-efficiency, essential amid economic uncertainties and market shifts." 

 

In addition to this, advanced financial forecasting brings with it a slew of other benefits. As Pardasani says, "It provides great opportunities in strengthening financial resilience, identifying new opportunities; the development of responsive strategies; the need for further increases in efficiency; overcoming the challenges of uncertainty; and, of course, the ability to adapt to changing circumstances.

 

In addition to market pulls, new technologies such as machine learning and predictive analytics are creating the appropriate foundations for organizations to act more proactively, efficiently, and responsively in the face of uncertainty."
 

However, it is more than just the needs and the benefits driving organizations towards advanced financial forecasting. According to Bassam Dahman, Managing Partner, and RSM Regional Leader - MENA, "There are several incentives aimed at increasing the attractiveness of adopting advanced financial forecasting and the transition of companies towards this paradigm. 

For example, many organizations are offering training programs to upskill finance teams, implementing user-friendly software solutions to enable forecasting, and providing access to expert guidance to navigate
the implementation process. 

 

Thanks to the increasing availability of advanced analytics tools,
the current main incentive – allowing, for the next 5 years, significantly improved accuracy and responsiveness to organizations of all sizes investing in advanced financial forecasting, according to the best practices and guidelines set forth by professional organizations – is supposed to be even more beneficial starting from 2024 onwards."

 

The implementation proves challenging.


With advanced financial forecasting being instrumental in ushering in the next era for financial management, how are organizations addressing the need to enhance their forecasting capabilities to support these strategies In short, not so easily.


"The transition to advanced financial forecasting", according to Baasab B. Deyb, FCA, Partner at RSM, "takes place in several stages: The adoption of new tools and technologies, the development of scenario planning capabilities, the integration of driver-based modeling, the establishment of rolling forecasting processes, and finally the creation of a culture of forecasting throughout the organization." 

 

The nebulous process for a full-scale transformation of financial forecasting is a massive undertaking with a sizable commitment of time and resources that many organizations may not feel the need to make. "The challenge of changing mindsets remains a challenge", says Deyb, "With many organizations needing to shift from traditional, reactive approaches to proactive, forward-looking ones. This requires a substantial amount of time and resources for seamless implementation."
 

In addition to the challenges, Deyb continues, "Concerns around data accuracy and the complexity of new tools remain of utmost importance too as advanced forecasting is adopted. Even once this has taken place, the work is not done, as organizations also need to effectively upskill their finance teams to leverage these advancements, which has also proven a significant
hurdle."
 

In the MENA region, this is echoed by many experts,, and is a significant emphasis on upskilling finance professionals to adapt to new forecasting tools and approaches, which is crucial for a successful transition to advanced financial forecasting. This shift requires not only technological upgrades but also an optimization of processes and, of course, a cultural change within organizations. It is not all doom and gloom, however. Despite the hindrances at hand, many organizations remain resilient. 

 

In the MENA region, as Pardasani says, "Many organizations are adopting phased approaches, leveraging support where possible. Despite these challenges, significant investments in advanced financial forecasting and the associated capabilities required to support them continue to be made by organizations, with greater agility and competitiveness remaining the major drivers."
 

The Takeaway


Advanced financial forecasting promises a more proactive, responsive era for organizations, an era that could redefine financial management and provide significant growth opportunities.
However, in order to foster an effective transition to advanced financial forecasting, the need for skilled and committed finance teams, robust forecasting processes, and supportive resources are universal.


By embracing forecasting innovations and learning from each other's experiences, organizations
can collectively navigate the path to advanced financial forecasting and usher in a new era of resilient, agile, and proactive financial management.


For more information on financial forecasting or how RSM can help your business, please visit our website https://www.rsm.global/uae.