From VUCA to BANI

How CFOs use the RAAT approach to promote agile corporate governance

31.10.2023 - How can companies adapt their management to remain competitive in the long term in a dynamic environment? What challenges must be overcome for agile management and what opportunities can be realised?
These questions were discussed with CFOs from different industries during the last CFO Roundtable in Düsseldorf.
Various models and approaches such as objectives and key results were highlighted, which support CFOs in adapting the management of their companies. The expert and guest speaker Dr. Jochen Holzwarth, (Managing Director of Dynamic Finance GmbH) enriched the discussion with additional impulses from the German economy.
For a long time, the so-called VUCA concept (volatility, uncertainty, complexity and ambiguity) described the dynamic and complex challenges of the business world. But in times of inflationary pressure, interest rate rises, climate change, digital transformation and constantly changing conditions, the VUCA model is proving increasingly outdated.  Now it is being replaced by a new model - the BANI model.

The crucial differences between VUCA and BANI

The American futurologist Jamais Cascio developed the BANI model, which stands for “Brittle”, “Anxious”, “Non-linear” and “Incomprehensible”. It serves as a guide to better understand and respond effectively to changing conditions.
"Brittle" describes systems that appear stable at first glance, but do not have enough flexibility to withstand pressure. This can be seen, for example, in companies that follow rigid processes but cannot adapt in time to the fast-moving digital world.
"Anxious" reflects widespread fear and anxiety about the future, which can lead to cautious and passive behaviour, such as the uncertainty of investing in volatile economic times.
"Non-linear" addresses the challenge that events and developments are becoming less predictable and difficult to understand. This  can be reflected, for example, in the unpredictability of market trends and consumer behaviour.
"Incomprehensible" represents the paradox in which we live: Despite the abundance of data and tools at our disposal, we often feel overwhelmed and have the feeling that we do not understand the world.
In contrast to VUCA, BANI focuses on the feelings and thoughts of the people who live and work in such situations. You could say VUCA describes the situation or environment, while BANI pays more attention to how people react to it.

The practical application of the BANI model

Along with the BANI model, Cascio has developed some ways to implement it. These allow us to look at areas previously neglected by VUCA and provide insight into the impact of changing circumstances on people themselves. To this end, he describes the RAAT approach (Resilience, Mindfulness, Adaptation, Transparency) to defy emotional and psychological challenges.

1. Build resilience

As a CFO, you should develop and implement strategies to ensure early detection and mitigation of unforeseen crises for your company. You should invest in risk management tools and techniques and develop detailed contingency plans to not only manage crises but emerge stronger.

2. Promote mindfulness

You should establish a culture of mindfulness that enables your staff to regulate their emotions and reduce stress. This could be achieved through training or workshops on stress management and improving emotional wellbeing. A mindful work environment can increase productivity and improve employee satisfaction.

3. Prioritise adaptation

Use new technologies, especially data-driven insights and AI technologies, to make informed decisions and successfully digitise and automate processes. Emphasise the importance of adaptability in your organisation. Don't just react to change, be proactive. This means continuously preparing for potential changes and being flexible enough to adapt your strategies accordingly. Train your staff to see changing conditions as opportunities rather than obstacles.

4. Ensure transparency

You should make information accessible and understandable within your organisation. To do this, form cross-functional teams to improve the flow of information and develop innovative solutions. As CFO, you play a crucial role in providing relevant financial data and should present this information in a way that everyone in the company can understand. Transparency builds trust, improves collaboration within the company and enables everyone to make informed decisions.

The challenge of agility in finance

The classic, hierarchically organised finance department was once the norm, but is increasingly unsuitable in the age of BANI. "We need to move away from rigid organisational charts and towards flexible, innovative and adaptive ways of working," emphasises Dr. Holzwarth.
However, the shift to an agile organisation does not mean throwing hierarchy completely overboard. "It is not a question of either - or, but a balance between the strengths of both organisational models," explains Dr Holzwarth. "A hybrid structure in which agile and hierarchical organisations coexist can be the solution", says Dr. Holzwarth. "Transactional tasks remain hierarchically organised, innovative tasks are solved faster and better through agile organisation. There, 'swarm intelligence' is used by employees with very different experience developing solutions together. The solutions are developed in short cycles as prototypes, then tested with internal customers and further developed with their feedback."

Looking to the future: CFOs drive change

Today's CFOs are called upon to take a proactive role in shaping corporate governance. They are in a position to anticipate change and take forward-looking measures. By understanding the BANI model and applying the RAAT approach, they will be able to master the uncertainties and challenges of today's business world and at the same time tap into new opportunities.