To assist financial institutions in achieving quantifiable benefits as a result of transforming their strategic planning and budgeting processes, this report offers our firm's point of view on the current state of budgeting and forecasting and the existing barriers to change and a framework to implement and achieve an effective strategic planning, rolling forecast, and performance management process
Annual budgets are unable to keep pace with the constantly evolving business environment. As a recent example, the planning cycle for fiscal year 2009 began with market swings and seismic changes in the funding and liquidity landscape, rendering many traditional budgets obsolete before the fiscal year even started.
Executives and other stakeholders have long vilified the budgeting and planning processes. Costly and time consuming, these processes often provide little return on investment and are not always in line with drivers of shareholder value. Further, they divert attention away from the most relevant performance management activities. Despite their limitations, many financial institutions have been slow to abandon or reengineer traditional budgeting processes.
Several financial institutions have begun to achieve quantifiable benefits as a result of transforming their planning processes. Traditional, bottom-up budgeting and forecasting processes should be transformed into rolling forecast and performance management processes that are relevant to key business objectives.