4 Ways to be Financially Agile in Times of Uncertainty

Mining operates in a complex environment, and while the sector is accustomed to dealing with commodity price volatility, 2020 has thrown up unprecedented challenges and opportunities that no one could have predicted.  

According to KPMG’s annual survey, Risks and opportunities for mining – Global Outlook 2020, commodity price risk, credit risk, and currency risk were cited by executives as top concerns for their own mining company. 

Against this backdrop, the firm said that in more uncertain times, the industry would see a focus on going back to basics, such as increasing productivity and managing costs. 

The drive to achieve value creation and successfully navigate through tumultuous waters requires an agile budgeting culture that enables CFOs to best prepare the organisation for the future. 

For mining companies grappling with achieving an agile forecasting process, they should look to an enterprise financial solution that provides a trusted and flexible approach to financial planning. 

A key part of that enterprise solution rests in intelligent tools such as RPMGlobal’s XERAS Enterprise, a financial modelling and mine budgeting software that provides companies with the ability to create increased business efficiency and value. 

Below are four key ways operations can achieve financial agility to become more flexible, efficient and come out of the year in a stronger position.  

1. Understand your business better – To truly be financially agile, you need to understand your business. This means having information and knowledge about where you are most sensitive to change. Knowledge is power and if you know how your business will react to a change in circumstances, you will be able to set in place some plans to best deal with the situation. The ability to test various scenarios and ask ‘what if fuel prices go up, or the cost of travel skyrockets?’ enables you to assess the impact of the change on the company’s revenue, profit or cost base. The ability to work out where you are most sensitive and build contingency plans around that empowers agile organisations to be better prepared for future external changes.  

2.  Contingency planning – In order to get a firm handle on how to best manage operations in times of unpredictability, it’s important to have robust contingency plans in place.  It’s hard to plan for a global pandemic, but now that we know about it, operations should be looking at how to increase performance through re-planning. Contingency planning is all about knowing how you might react to different situations. Successful contingency planning is predominately about forward thinking to understand how to best manage a situation in the future to have a head start on your competitors. Having contingencies laid out enables organisations to think about how they can not only plan for the worst, but also plan for the best and quickly capitalise on improved operating conditions such as a spike in commodity spot prices. Contingency planning and agility go hand in hand.  

3. A zero-based budgeting approach – There’s no point forward planning based on last year’s plans/actuals. As the market factors and operational drivers of this year differ greatly from last year, it is counterproductive to base financial predictions on past spend. Financial agility means organisations need to balance being prepared for short-term change with long-term planning. Zero-based budgeting (ZBB) is a process of evaluating the need to perform every activity within an organisation and then understanding what drives the costs of those activities. Only once the physical plan of activities is completed do you apply the cost rates in the budget. Applying an agile ZBB methodology helps companies drive significant cost savings within a culture of cost visibility and accountability.  

4. Enterprise integration – Many organisations will spend significant time and money on enterprise resource planning (ERP) systems, yet underpin their future planning with little more than a group of manually linked spreadsheets. For a financially agile organisation, it’s paramount that managers have the ability to see the entire financial situation with the right information at the right time. Integrating financial modelling with ERP, mine planning and asset management systems significantly reduces preparation time, while simultaneously reducing the risk of error by removing numerous data handling touch points. The result is managers and analysts making decisions on controlled, trusted information in a much shorter space of time.    

Creating an agile finance function is no longer an option for operations; it’s a requirement. An agile business culture is supported by the latest technologies and enables leaders to make frequent changes as conditions require. If companies are struggling with financial agility, XERAS Enterprise is the answer to unlocking the intelligent approach needed to best prepare organisations for the future.