The nachos and chili are prepared, your favorite beer is chilled and ready to go. But before your watch party can begin you've got a choice to make. Who are you rooting for at this year's Super Bowl?
Now think twice before you decide. Because it turns out all of your financial investments for the year ahead could depend on the winner. Or at least that's what the Super Bowl Indicator would have you believe.
First introduced in 1978 by New York Times sportswriter Leonard Koppett, the Super Bowl Indicator uses the Super Bowl results as a stock market predictor. A win by a team from the American Football Conference (AFC), it suggests, will result in a bear market--or stock market decline--in the year ahead. By contrast, a win by a team from the National Football Conference (NFC) will mean a bull market, or stock market rise.
By that measure, a 2022 win by the Los Angeles Rams should earn the stock market a stellar year. A victory by the Cincinnati Bengals, on the other hand, will see it falter.
So go Rams, go, right? Or not.
Find out how former Super Bowl champions the Kansas City Chiefs use Vena to speed up their financial plays.
While the Super Bowl Indicator had a 100% success rate when Koppett first introduced it in the 1970s, as of 2021 that accuracy had declined to 74%. And it hasn't been faring well in recent years. In fact, it's been wrong for the past five years straight.
That's because--not surprisingly--there's nothing scientific about the Super Bowl Indicator. Finance teams everywhere understand that "correlation does not imply causation" and that there are more useful tools than touchdowns and field goals to plan out your next play.
So why not just root for the team you're most excited for on game day and use the other tools and processes available to plan ahead. Here are three methods that don't rely on a single sporting event to help you stay ready for the future:
For most finance teams, forecasting is a natural part of the budgeting cycle. By applying available historical data and updating key performance metrics, forecasting helps you predict future business results.
And chances are you've already got a regular forecasting routine in place--in fact, if you're a publicly traded company, you're required to disclose high-level forecasts to your investors. But the frequency of your forecasting is also key. Many organisations rely on quarterly or monthly forecasts to fuel their decision making--but ongoing rolling forecasts will better show you exactly what play's the right one at any given time.
Rolling forecasts can help you create a more reliable game plan by revealing ongoing business trends, focusing your attention where it's needed and enabling you to divert resources as required. And with the level of uncertainty and constant changes we've seen over the past two years, they've become more of a priority for many finance teams. In The State of Strategic Finance, our 2021 benchmark report, 24% of respondents said they'd introduced rolling forecasting over the year past--a number that's hopefully only continuing to grow.
Our 2021 benchmark report showed us something else as well: only 40% of organisations were employing scenario modelling before making forecasting adjustments in 2021--meaning 60% weren't. Yet scenario modelling and what-if analysis are other powerful tools that will help you prepare for all possible versions of the future.
Thankfully, 40.5% of the respondents we surveyed understood that, saying that they were looking to prioritise scenario modelling and what-if analysis in 2021. That's a win in the making, since the most strategic finance teams embrace scenario modelling as part of their daily, monthly or annual routine.
By linking business drivers to key performance indicators (KPIs), monitoring those KPIs and factoring in external modelling inputs, scenario modelling allows you to put a winning strategy in place, while also preparing for a loss--looking at high, medium and low scenarios and mapping out your future plays.
Scenario modelling also helps you know exactly what levers you can pull at any given moment to adjust your next move. It lets you assess the impact of changes you're planning or market shifts underway, using all of the financial and non-financial data at your disposal to do so--from sales volume and headcount data to pipeline and historical data. All of which better lets you keep your eyes on the prize.
Finance has been slow to embrace artificial intelligence (AI) and machine learning (ML)--so much so that our benchmark report showed that only 7% of finance teams were using it in 2021, the exact same percentage we saw in 2020. But AI and ML--along with predictive analytics--offer a way to tackle more complex problems and stay ready for whatever is ahead.
As finance takes on a more strategic role--and integrates more and more data into decision making--AI and ML can play an important role, helping you dive deeper, to identify trends, data anomalies and correlations that will help you better prepare for anything ahead. AI can also help you get extra yards out of your scenario planning by evaluating millions of data points to accurately determine best and worst-case scenarios without fear of human error.
Alongside AI and machine learning, predictive analytics and predictive budgeting can further help you make predictions for the long- and short-term future. By leveraging modelling and statistical algorithms--and drawing on broad and deep sets of historical data--it can help you determine potential risks and future outcomes, reduce inefficiencies and make better choices for your team and organisation as a whole.
None of these methods start with a kickoff--but they can gain more traction with a complete planning platform that lets financial and operational planners draw from financial and non-financial data sources and quickly get to the insights you need. With that in place, you can quarterback your team to victory, staying agile for the future no matter what it holds.
Which means this Super Bowl Sunday, forget about what the winning team might say about future financial trends--and just let yourself enjoy the game.
Want to learn more? Join Kansas City Chiefs' Michael Ragsdale, Director of Strategy and Analytics, in Vena's Reporting and Analytics Livestream on March 22, 2022. Sign up today.
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