Unlock advanced budgeting and scenario planning capabilities
A good enterprise performance management (EPM) system can provide valuable benefits in any industry, but it is a particularly helpful tool for an asset management firm.
EPM’s budgeting and forecasting tools enable asset managers to make data-driven decisions to maximize the impact of their investment dollars. In advanced EPM systems, lightning-fast scenario-planning capabilities help asset managers understand the effects of potential future events and actions on assets under management (AUM) and other key organizational metrics.
Aided by increasingly powerful artificial intelligence capabilities, these valuable insights lead to better investments, improved organizational performance and ultimately enhanced client outcomes.
“EPM is such a rich use case for AI capabilities,” said Matt Lavery, Technology Modernization Principal for Grant Thornton. “That’s what everybody wants. Take the data and give me insights about the future that otherwise would be hidden from me. That’s the powerful benefit that EPM can provide.”
EPM provides an important advantage in the timeliness that is essential in investment decisions. Complex data analyses that took months to complete in the past now can be finished within minutes when data is structured properly and incorporated into EPM systems.
“This technology helps asset managers get better information to make enlightened decisions that improve organizational performance,” said Michael Patanella, Grant Thornton’s National Managing Partner for Asset Management. “The technology also can assist with the scaling of your business, as seen by PE managers who are scaling up as they increasingly bring in capital from retail investors. Getting insight into the effects of potential future scenarios is powerful for asset managers.”
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A systematic approach to planning
The cumbersome legacy systems commonly used for planning and forecasting rely on fragmented models, often built on spreadsheets. These systems require significant manual data preparation, aggregation and validation.
“EPM solutions create a systematic approach to planning and forecasting that removes the need to manipulate or manually leverage data by putting structure and controls in place that enable continuous evaluation of the potential performance of an organization,” said Mike Pilch, Technology Modernization Managing Director for Grant Thornton. EPM systems also provide virtually instant answers to queries on topics such as the potential impact of future interest rate changes on various organizational and investing KPIs.
This business decision support provides management with actionable insights related to potential changes in demand, interest rates, market volatility and numerous other factors. This information helps asset managers proactively mitigate risks and seek opportunities rather than reactively interpreting scenarios and situations after they occur.
Asset managers use EPM to fully understand their current organizational state compared with where they stood six months or a year ago when they completed their annual plan. And the scenario-planning capabilities included in EPM systems help management understand potential outcomes based upon a range of factors, giving insightful data for management as decisions are contemplated.
Those decisions can be related to:
- Implementation of preventive controls to manage anticipated risks.
- Product offerings.
- Merger and acquisition opportunities in an industry where M&A transactions are common.
EPM provides asset managers with a systematic way to determine the potential financial impact of an acquisition or new business. EPM can be used to identify synergies and cost-reduction opportunities and provide a data-driven perspective on the potential outcome of acquisitions. When asset managers evaluate the potential of multiple M&A opportunities simultaneously, EPM also can make a difference with an analysis that shows which of those transactions would be most beneficial to a firm.
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Integrating for agility
Although asset managers can face a challenge after an M&A transaction in integrating the data into EPM systems from acquired entities that have operated on different systems, the power of the EPM-enabled budgeting and forecasting makes the data harmonization worthwhile.
EPM gives organizations a chance to make the prompt decisions needed to drive success at a time when the pace of change in the market is rapid. When leaders need to change hierarchies, dimensions, drivers or assumptions, their EPM-based models update instantly.
“The whole idea is to have EPM fully integrated into your existing financial system for maximum agility,” Lavery said. “EPM is separate, but it’s aligned to your financials so you can change the modeling as conditions change so you can make the timely decisions needed to produce optimal results in this environment.”
Implementation of these capabilities can be done in stages. It can start with basic budgeting and forecasting tools with automation that feeds organizational data directly into the system and performs calculations. EPM becomes more powerful over time as analyses based on selected drivers are added to the system, and ultimately the most complex forward-looking scenario planning becomes available in the most advanced iterations of EPM.
Capabilities will advance
Depending on their needs, some asset managers are implementing EPM budgeting and forecasting systems for the first time now, while others are adding capabilities to systems they have previously installed.
“Some firms are in their infancy with this technology, while others are more advanced,” Lavery said. “Fortunately, it’s possible to take a gradual crawl, walk, run approach to EPM.”
The capabilities of EPM systems also will grow as the AI embedded within the tools becomes more advanced. As AI is only as useful as the data that feeds it, EPM requires a streamlined connection of operational data with financial data that often is not present in legacy systems. Meanwhile, the rapidly changing business environment requires agility in managing data.
“You want to have flexible management of the hierarchies from which you report on your business,” Lavery said. “As you go through reorganizations or acquisitions, you need to be able to streamline and update your hierarchies accordingly. This is very important because acquisitions are so common in the asset management industry.”
Another prerequisite for success with EPM is a fully aligned partnership between the core business and the FP&A function. That alignment should be supported by investments in technology and people that are designed to deliver on the expectations for EPM that are laid out in organizational strategy.
“You don’t want multiple stories being told,” Pilch said. “You’re trying to interlink the stories based on the one source of truth that emerges from the data, which provides better insights. And then you have to make it relatable to provide the input you need for your decisions.”
Winning the race for growth
This is an ideal time for asset management firms to get the data-driven decision support that EPM can provide. Asset managers have been in a steady race with their competitors for growing client base and overall AUM, and the right EPM system can drive forecasting and budgeting capabilities that give a firm an edge in that race.
“From a finance perspective identifying the potential outcomes for various factors and drivers can be powerful,” Pilch said. “Whether you’re looking at M&A, new products or mitigating risks, EPM frames up the story from a financial perspective to support the decision-making process.”
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