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Why the T-factor is the FP&A Pivot for Financial Services

Ashwini Kamat

Senior consultant, BFSI

Over the past two years, the financial planning and analysis (FP&A) function has reinforced its reputation as the ‘fog lights’ of organizations. With a deep understanding of organizational policies and actions in the current and future contexts, FP&A teams have helped navigate uncertain business situations to drive better results.

The next era of FP&A will require a rethinking of skillsets as the need for advanced analytics, machine learning, and scenario modelling accelerates. These requirements are particularly critical for banking and financial services (BFS) firms. From macroeconomic headwinds to changing customer behaviors and the entry of fintech and regtechs in their traditional protected markets, BFS firms have faced a host of challenges in the past few years. 

The dearth of modern skills could compromise the ability to respond to these challenges and return to the growth track. Many BFS organizations are already evaluating skillsets in preparation for evolving requirements. TCS Global Financial Leadership Study revealed that 41% respondents in BFS organizations ranked investing in team skillsets as a top focus area to develop FP&A activities. As BFS firms prepare to acquire the requisite modern FP&A skillsets to ensure success, a closer look at a unique set of cross-skills— the ‘T-factor’ — is essential for optimizing skills investments.

A T-shaped edge

Individuals with T-shaped skillsets have long been considered particularly valuable across multiple sectors. A set of core expertise combined with broad skillsets can help increase preparedness for a rapidly evolving world, particularly with the adoption of digital technologies.

The ideal T-shaped FP&A teams blend in core FP&A skills such as planning, forecasting, and accounting, along with a wider ability to apply advanced AI and machine learning technologies, risk assessment and scenario modelling skills (see Figure 1).

Figure 1: The cross-skills required in FP&A teams for banks and financial institutions combine deep and broad skills

TCS’ Global Financial Leadership Study provides a useful snapshot of current BFS capabilities for both core and advanced FP&A capabilities and skills, as well as perceived gaps. The study surveyed 750 CFOs and senior finance leaders from across the globe, with annual revenue of at least $5 billion, to discover how they are transforming financial planning and analysis processes for high-change environments. Banking and financial organizations represented around 75 (10%) of the total respondents across 14 sectors.

Overall, results from survey respondents in BFS organizations trended above average when compared to total respondents. For example, 60% of BFS respondents said they can rapidly create multiple, detailed what-if scenarios based on different internal and external models, compared to just 48% of total respondents. Similarly, 55% said the same for their ability to deliver short-term forecasts as against 50% of total respondents.

When it comes to advanced FP&A technologies, BFS organizations are further ahead—61% of BFS organizations said they have the ability to use advanced FP&A technologies such as AI and machine learning to a full or significant extent, while only 44% of total organizations surveyed reported the same.

Figure 2: Banks and financial institutions are well placed in financial planning capabilities

Potential paths for growth

On the other hand, some areas require stronger focus. For example, 49% of BFS respondents reported the ability to perform advanced data analysis to a full extent—slightly below the total average of 52%. And while 54% of total respondents report they possess the right structure or practices to achieve digital maturity in their finance function, just 51% of BFS respondents. Scenario modelling, which is expected to play an increasingly larger role in the finance function, is in the early stages of maturity for both the total respondents and BFS firms alike. Just 44% of total respondents and 43% of BFS respondents report that they have these capabilities to a full or significant extent.

When it comes to risk and control, 71% of survey respondents say they can consistently identify sources of risk without significant errors. At 68%, BFS respondents are still firmly in the majority, but are nevertheless slightly lower in an area so critical to organizational resilience. This slight shortcoming becomes more worrisome when it comes to overall risk assessment capabilities—only 43% of BFS organizations report having them to a significant or full extent compared to 54% of total respondents (see Figure 3). Needless to state, this is a matter of major concern.

Figure 3: Banking and financial institutions score lower than average in risk assessment

Ready for the next era of FP&A

New technologies, particularly in analytics and scenario modelling, will help FP&A  teams prepare for the increasingly complex demands placed on them. But investments in their skills base, whether internally or via arrangements such as shared services, can help ensure their position as a growth partner and a strategic partner to the rest of their organization. Viewing skillsets through a T-factor perspective can bring valuable guidance to layer existing core skills with the breadth and depth of advanced skils.

Discover more practical insights from the TCS Global Financial Leadership Study: The Next Era in FP&A

About the author

Ashwini Kamat
Ashwini Kamat is a Senior Consultant with the Banking and Financial Services (BFS) business unit at Tata Consultancy Services (TCS). A qualified Chartered Accountant, she has over 26 years of industry experience and currently leads the Finance and Reporting practice of the business unit.