What are the Five Tasks Every FP&A Group Must Accomplish?

The primary goal of financial planning and analysis (FP&A) groups is to manage the value of the company. That’s the insight from Gerhard Lohmann, chief financial officer, reinsurance of Swiss Re, the largest reinsurance company in the world.

According to Lohmann, FP&A must:

  • Understand the value of the company.
  • Describe the value of the company.
  • Steer the value of the company.
  • Extract value for the company.
  • Report the value of the company.

“We have tons of intelligent people in FP&A, but very few who can describe this value to management and business units,” Lohmann said. “When you think about what’s relevant, it’s not just intellectual capability. It’s essential that we are capable of telling where and how value is coming to our company. This is more difficult than merely understanding.”

By steering the value, Lohmann explained, FP&A must define the metrics. Allocating capital usually is a primary metric in this regard. Companies are often restricted by how they can extract value by regulations, or in the form of shareholder dividends. Swiss Re is trying to extract value, for example, by better understanding its economic balance sheet.

The fifth and final step, reporting value, is one where many FP&A groups must improve dramatically. “Companies are bad at explaining to the capital markets how value is created,” Lohmann said. “A huge task is finding ways to communicate this to the market so the value gap of our understanding and the market’s perception closes.”

For Swiss Re, this means having an outside auditor examine its economic balance sheet for the first time to give investors more transparency. “We’re trying to turn our balance sheet into a reporting standard,” Lohmann said.

FP&A, Lohmann added, touches almost everything in a company. “If you do it right you start managing the entire value chain of the company,” he said.

Lohmann closed his remarks by offering insights on what he looks for in his 250-member FP&A group:

  • Never compromise on quality. “Hire people that are a lot better than you are,” he said. “I don’t want people to tell me what I want to know. I want complimentary capabilities.”
  • Hire diversity. “If they have complementary skills and knowledge, then I am creating something new,” he said. “Diversity of age, experience and gender is important.”
  • Look toward the future. “We don’t know what environment we will interact with tomorrow,” he said. “We can’t just hire people to tell us what we already know and expect them to tell us about the future.”



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