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How to Manage the Financial Impact of Uncertainty with Dynamics 365


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2019 Trends in Finance, Part 4: How Uncertainty Impacts Businesses

In recent years, the global economic climate has undergone major shifts. With the combination of Brexit, the trade war between the US and China, changing environmental and financial regulations and more, uncertainty in the global market has become the new normal. In a recent survey of leaders working in finance, nearly half of respondents indicated that they feel more exposed to uncertainty now than just a few years ago.

 

Global uncertainty can result in major challenges for businesses. In Part 4 of our six-part blog series on 2019 trends in finance, we take a look at how uncertainty can impact the ability of financial professionals to accurately evaluate risk and anticipate performance.

 

Regulatory Uncertainty 

Nowadays, CFOs and financial departments are managing a whole host of new tasks. They have to determine where to invest a company’s resources, identify opportunities for growth, and attempt to calculate risk. All of this has become more difficult as a result of regulatory uncertainty related to financial regulations, data security, and policy changes.

 

Financial Regulations

In light of recent changes to the US tax code and accounting standards, many businesses have been forced to dramatically alter how they do their financial reporting. With more than 1,300 proposed tariffs on the horizon in addition to the existing steel, solar panel, and aluminum tariffs, there’s growing concern that economic growth -- both in the US and overseas -- could suffer. A recent report from PwC indicated that half of U.S. CEOs are worried about excessive regulation, while a study conducted by Ernst and Young suggests that more than half of CEOs find themselves exposed to greater risk as a result of regulation.

 

Data Security

Data security is another major concern. With the introduction of GDPR, companies have had to devote significant resources to ensuring consumer data privacy. Meanwhile, a recent study shows that nearly 40% of the businesses surveyed were still completely unfamiliar with GDPR.

 

Policy Changes

In addition to shifting regulations and security concerns, governments have in some cases introduced dramatic policy changes. New environmental policies can impact how and where businesses source essential materials.

 

The Brexit Effect

Britain’s departure from the European Union has been on the horizon since the Brexit vote in 2016. While the original departure was scheduled for March 29, 2019, Britain still hasn’t left the EU as of the publishing of this post. The looming Brexit is weighing heavily on global commerce, however.

 

There’s an enormous amount of uncertainty connected to Brexit. The UK hasn’t yet renegotiated a score of important trade agreements, and companies with large financial interests in Britain find themselves having to guess at how they should respond. Many businesses looking to expand overseas are opting to bypass the UK entirely and set up shop within the EU instead.

 

How Uncertainty Has Impacted Businesses

In 2010, the National Bureau of Economic Research released a report which demonstrated how uncertainty can have negative economic consequences. In the face of uncertainty, businesses tend to behave conservatively: they invest less than they otherwise would in new products, manufacturing, R&D, and other important growth-related areas. A 2015 report from Accenture indicated that more than 70% of those working in finance agree that forecasting is either as difficult as ever, or more difficult than in the past -- and more than half anticipated it would get even harder in the coming years.

 

Managing Uncertainty and Risk with the Help of AKA Enterprise Solutions 

Anticipating and managing risk requires the right tools. AKA has the knowledge and experience necessary to provide businesses with the technology they need. Our solutions enable our partners to limit risk exposure while simultaneously engaging in detailed, data-driven reporting. The end result is an improved ability to anticipate risk and respond accordingly.

 

READ THE FULL ARTICLE

 

In Part 5 of our 2019 Financial Trends blog series, we’ll take a look at how the changing workforce (shifting from baby boomers in leadership roles to millennials) is impacting businesses across all sectors.

 

Did you miss the first three posts in our series? Click to read parts 1 through 3:

 

Part 1: The Role of the CFO is Changing

Part 2: Customer Demands are Changing

Part 3: Leveraging Technology for Smarter Decisions and Reduced Risk

 

Want to read more about financial trends? Click here to download the 2019 Finance Trends Report from Microsoft.

 

 

 

 


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