This document discusses shadow finance, which arises when individuals outside of a company's FP&A (financial planning and analysis) team perform financial analysis and reporting functions. Shadow finance can be problematic if leadership makes decisions based on unvalidated shadow information. The document identifies three drivers of shadow finance: access to large datasets, limited FP&A budgets, and demand for quick answers from domain experts. It argues that shadow finance hides the true costs of management reporting and leads to duplicated work. The document recommends that FP&A teams use collaborative reporting tools to monitor all financial analysis and become trusted business advisors rather than just owners of data and information.

1. Identifying Costs of
Shadow Finance in FP&A

2. Shadow finance arises when
individuals outside of the FP&A
team's oversight perform functions
that are also performed by the
FP&A group.
What is shadow finance?
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3. What is shadow finance?
Shadow finance is financial and
nonfinancial data or KPIs pulled
together in an ad hoc process
not validated or reviewed by the
FP&A team.
$

4. This can be a problem
if leadership wants to
take action based on
shadow information.
What is shadow finance?

5. How did shadow finance
get to this point?
Three identifiable drivers are:
1. Access to data
2. Limited budget
3. Speed and domain knowledge

6. 1. Access to data
A data tide has been building for the
past 25 years. The challenge is for
FP&A teams to continue to expand
their understanding of this rapidly
growing dataset, with little to no relief.

7. 2. Limited budget
There is a widespread belief that finance
department operations should cost about
1 percent of company revenue.
To protect budgets, FP&A teams have had to turn
away internal customers who then seek out data
on their own.
Business functions, especially profit centers, have a
greater ability to absorb the implied costs of
information production.

8. 3. Speed and domain knowledge
As organizations increase in complexity, they
hire specialists to execute various activities.
Management is aware of the availability of
information to these experts and reasonably
expects answers more quickly.
They go directly to the business about the
information being requested—the classic
scenario of going straight to the source.
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9. • With large or growing complex
datasets, and/or
• Where leadership has taken an
interest in managing the results
To identify areas where shadow finance solutions
may exist in your own organization, look for areas:

10. Why is shadow finance a problem?
If an organization has operational
objectives in managing the costs
associated with the data and
information production, it should
capture and report all costs
associated with these activities.

11. Whether an organization
believes best-in-class finance
costs should be 1 percent of
revenue or another metric,
the true cost associated with
this activity remains hidden.
1%true
cost
estimated
cost

12. Organizations are unable to
accurately measure the true
costs of management and
performance reporting.
Compounding this cost is the
cost of the duplication of data.
$

13. The value of being able to
provide data more quickly to
leadership is not worth the
significant risks associated
with an unmonitored structure.

14. Shadow finance did not arise maliciously.
• Better manage the complex, and ever
increasing, demands of their jobs
• Deal with the constraints of current
enterprise systems and resources
Employees who create shadow finance
solutions are innovative and self-sufficient.
This creativity should be encouraged, but guided.
It comes from the needs of employees to:

15. FP&A teams have the opportunity to transform
themselves from data and information owners to
process and business advisors with the help of
collaborative reporting tools
$

16. Dedicated reporting applications
are not ERPs or data warehouses.
They are built to foster collaboration
and transform data into information
that can be shared across the
organization.

17. Use available technology to your advantage.
Wdesk provides the ability to:
• Control ownership of information
• Produce and track where
information is being used
• Share data securely

18. The adoption of reporting
applications, such as Wdesk,
by FP&A teams gives them a real
path to taking the shadow out of
shadow finance and transform
themselves from information
owners to business advisors.
$

19. Wdesk offers:
• Robust audit trails that keep
track of what changed when
and by whom
• Advanced linking to ensure
consistency of information

20. Technology allows the
business to capture savings
by reducing duplicate efforts
that can be reallocated for
other initiatives.
By leveraging technology, leadership will
see marked improvement in the reliability
of information, while retaining a direct
relationship with the business in both
speed and accountability of results.

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