Today's CFOs are navigating a highly volatile operating environment under the intertwined influences of tariff pressures, interest rate uncertainty, shifting consumer behavior, and other macroeconomic turmoil. At the same time, these financial leaders are increasingly being called upon to make forward-looking strategic decisions on critical business elements such as capital allocation, hiring, and pricing.

The problem is that many CFOs rely on forecasts built almost entirely on historical internal data—a perspective that is inherently limited and backward-looking. It tells you what happened in the past, not where the future is headed. In a planning environment shaped by external events, this approach can lead companies to make high-stakes decisions without a complete picture.

As the operating environment continues to become more volatile and unpredictable, the risks of relying on such a limited perspective only increase.

CFOs need foresight more than ever

The role of the corporate CFO is evolving, expanding from financial monitoring and reporting—once core functions—to a more strategic mission. This is according to Simone Ferrari, Product Manager for FP&A Solutions at Board, a provider of enterprise financial and operational planning software.

"Today, CFOs need to be able not only to explain financial results but also to anticipate what will happen next," says Ferrari.

Ferrari notes that traditional tools are often "fairly deterministic and linear," making it difficult to provide the needed foresight. Given the rapid pace of change in today's business environment, any budget or forecast based on limited historical data is almost certainly outdated by the time it is released.

This in turn means that all downstream decisions supported by these reports—such as how much to invest and where, how aggressively to hire, and how to set pricing levels—are based on past conditions that often bear little resemblance to current reality, leaving companies constantly trying but struggling to keep up with market realities.

Why internal data is insufficient

The core problem with traditional FP&A is that internal data, by its nature, can only capture what has already happened within the organization; it cannot reflect the external forces currently shaping the business.

"For companies, much of the most important data does not come from within the company," Ferrari explains. "It comes from somewhere outside the organization, and the challenge lies in identifying and integrating that data."

On the revenue side, examples of critical external data include signals related to consumer sentiment, customer activity, disposable income, and even changes in government policy—none of which can be obtained from internal company systems. On the cost side, factors such as tariffs, commodity prices, raw material costs, and fuel prices have become increasingly important for companies and need to be monitored as close to real-time as possible.

But Ferrari observes that the real danger of conducting FP&A based on outdated or incomplete views of external conditions lies not just in imprecision; it lies in a false confidence—plans that appear authoritative but are actually based on limited, outdated, and/or irrelevant data.

"The biggest issue is how much confidence a company can have in a plan when all the internal calculations look correct, but it is not actually a reliable indicator of the true situation," Ferrari warns.

For CFOs seeking to avoid these pitfalls, the good news is that modern FP&A approaches can capture the full range of data companies actually need, while that data is still timely enough to serve as a useful and reliable strategic guide.

The path to better data

For financial leaders looking to improve FP&A by optimizing their use of data, Ferrari recommends a practical sequence of steps:

  1. Shift from calendar-driven to event-driven planning. Instead of treating planning as a periodic assessment based on past quarterly conditions, companies should react to events that warrant strategic reassessment—whether those events occur inside or outside the company.

"Many of the events that should reshape plans are external. If you can only react at the end of the quarter, you are already behind," Ferrari points out. "The real value lies in recognizing signals when they emerge and making adjustments while they can still have an impact."

  1. Unify the data view. Integrating finance, supply chain, and operations into a single view allows any ingested data to be structured in a coherent way, rather than being scattered across various systems.
  2. Distinguish signal from noise. Parse broadly available external data streams to identify what is truly relevant to your business. For example, Board's Signals platform provides access to over 5 million external data points that can be correlated with a company's own metrics. An AI layer performs an initial screening to narrow the scope, and then Board's team of economists works with customers to determine which metrics matter most to their business and how best to integrate that data into the planning cycle.
  3. Start small. For CFOs who know modernization is necessary but are unsure where to begin, Ferrari's advice is to first identify a critical cost or revenue item, and then map out the external factors that matter most for improving that area. New models should be benchmarked against traditional forecasts and fine-tuned over multiple cycles.

"Models may require several iterations to be fine-tuned," Ferrari notes. "But as FP&A strategies mature and financial leaders deepen their understanding, the models will gradually improve."

Want to learn more?

In a business environment where rapid change is the only constant, modern data approaches provide financial leaders with a clearer, more timely view of the forces truly shaping their business. With this new approach, they can plan with greater confidence, adjust quickly as conditions change, and better fulfill their increasingly future-oriented strategic role.

To learn how to equip your finance team with the data it needs to plan for the future, not the past,contact Board today。