Create scenarios with different potential exchange rates and show impact

Description

Create multiple what-if scenarios for different exchange rates, then put those side by side to see the potential impact on the business. This allows the organization to prepare for possible fluctuations in the currency markets and their effect on business performance.

Example Use Case

Scenario: A multinational corporation operating in diverse markets across the world uses CPM software for financial planning and forecasting. They need to evaluate various potential scenarios concerning changes in exchange rates to understand how the company's financials would be impacted.

Solution: The CPM software allows the creation of multiple scenarios, each representing possible changes in exchange rates. For example, the corporation can simulate an increase in the USD/EURO exchange rate by 5%, a decrease by 3%, or stability over the next quarter. The software then recalculates revenues, costs, and profits for each scenario, providing a comprehensive understanding of the potential impact of currency fluctuations on the corporation's overall financial performance.

Considerations

This feature isn't terribly common among pure play planning software. We see it more often in the financial model space, where these types of scenarios are easier to develop.

If you are using an OLAP system, make sure that the re-calculation of values does not take so long that it makes this feature difficult to use. Oftentimes currency is treated as a dimension, which means that adding new currencies, or changing the values of those over a period of time (which is also a dimension) can mean a long recalculation exercise.

When viewing a reporting interface it will be important to place those currency scenarios side by side and include a column that calculates the delta.

Questions to Ask a Vendor

• Scenario Creation: How easy is it to create scenarios representing different exchange rates in your system? Can the users set up these on their own or does it require assistance?
• Scenario Breadth: Are we able to take an entire plan and apply a currency prediction to it, or is it specific to individual parts of the plan such as revenue?
• Visual Representation: How visually comprehensive are the system's reports? Are the comparisons in sheets or are they represented in charts?
• Performance Impact: How quickly can your software recalculate performance measures considering various exchange rate scenarios and cube/OLAP recalculations?