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Making informed decisions with what-if analysis

Making informed decisions with what-if analysis

April 8th, 2020

Organisations need to be continually on the lookout for potential threats arising from a competitive and ever-fluctuating market. By challenging your assumptions and planning for multiple scenarios, you will be better equipped to make informed decisions. What-if analysis in planning can enable you to evaluate potential future outcomes and to create an understanding of how different variables can affect your business goals. These variables can be anything from sales, cost of sales, personnel costs, margin, etc.

What-if scenarios can be used in many ways:

  • Taking the extremes of a variable to see what the most dramatic financial impacts would be 
  • Creating worst / best case scenarios on e.g. sales to see the effect on margin
  • Looking “backwards” using e.g. Goal seek on margin to understand the impact on variables such as sales to answer questions like “Is it possible to achieve a certain margin based on set level of sales and what does that mean for e.g. cost savings?”
  • Creating multi-variable scenarios such as a dip in sales, cost-savings on resources and cost of sales

What-if analysis cannot predict the future but can be an important tool for painting a picture of what the future can look like, given certain assumptions.

Scenario analysis might not change your plan but can allow you to quickly have a plan in place once the underlying variables are changing. This will help you understand which scenario most closely reflects the current outcome and thus enables you to act accordingly.

What is the value of using a tool to model and plan ahead?

What-if scenarios can have a positive strategic impact for your organisation and give you competitive advantages. Most organisations are using spreadsheets to do budgeting and planning. Scenario planning in Excel, however, comes with several risks and challenges:

  • Multiple copies of the same data in various sheets to handle changes to variables
  • Methodical version handling to control and understand the effects
  • Challenges in handling complex models and calculations that are very time-consuming to work with when changing variables in calculations
  • High risk for manual errors and therefore low-quality data

Using dedicated software such as Oracle EPM Cloud can allow you to investigate different scenarios at the same time and also allows for multiple variables to change and review potential outcomes.

What-if analysis in Oracle EPM Cloud

What-if analysis in Oracle EPM Cloud can enable you to:

  • Quickly create scenarios on the fly
  • Combine different scenarios
  • Create business cases (e.g. for M&As)
  • Evaluate key metrics
  • Goal seek key KPIs
  • Compare results and understand various impacts

What-if analysis in Oracle EPM Cloud

Planning for the future is an essential part of the mindset of any successful business. We are convinced that by using a tool like Oracle EPM Cloud and quickly being able to plan ahead puts your company in the best position to make solid, data-driven decisions to keep your business on the right path.


About the author

Madeleine Löfblad

Madeleine Löfblad
SME Enterprise Planning and Solutions Architect EPM Cloud
madeleine.lofblad@inlumi.com

Madeleine is an advisory and application consultant with 20 years of experience within the area of business management, FP&A and implementation of ERP and EPM systems. She has previous experience from business controlling as well as financial close. Madeleine currently works as an Enterprise Planning SME for inlumi with great passion and enthusiasm for the FP&A processes and tools.