Financial Management

10The External View: Markets, Competitors, and Economic andGeopolitical Forces

Traditionally, finance and FP&A have focused on the internal workings of the enterprise, including revenue, cost of revenue and expenses, headcount, manufacturing, receivables, inventory, and similar components of financial performance. However, the greatest drivers, threats, and opportunities typically arise outside the enterprise. These include competitive and market forces, government regulation, geopolitical trends and events, technological advances, economic factors such as inflation and monetary policy, and many others. Finance must monitor external forces and trends to understand the effect on the organization and monitor future potential impacts. We can also add value by providing analysis of competitors, suppliers, customers, and other relevant players. In Chapter 1, a space shuttle cockpit instrument panel was used to illustrate key principles of FP&A. One of the five key features was to “provide insight into external factors and environment.”

Key Features from Cockpit Instrument Panel

1. Real-Time and Predictive Insights.
2. High Visual Impact.
3. Focus on the Important Measures.
4. Provides Insight into External Factors and Environment.
5. Combine with Observation, Experience, and Intuition.

The military mantra used in combat, “Keep your head on a swivel and eyes wide open,” seems appropriate for executives in the 21st century.

EXTERNAL FORCES

In Chapter 8, “Strategic Analysis and ...