Definition · financial analysis
Root cause analysis
Root cause analysis is the practice of identifying the underlying cause of a financial result or variance rather than its symptom. For root cause analysis, the useful boundary is the driver, assumption, source data, owner, time period, scenario logic, and decision the model is meant to support.
Also known as RCA, root-cause analysis
Why it matters
Understanding root cause analysis matters because planning only improves decisions when assumptions, drivers, owners, and time periods are explicit enough to revisit when actuals arrive. Pluvo automates financial root-cause analysis by tracing a variance through connected systems to the change that caused it, instead of leaving the chase to an analyst.
In practice
Planning example
Teams use root cause analysis when a forecast, budget, or scenario needs an assumption that can be revisited. The finance team should know the driver, source data, owner, and period before using it in a model.
Pluvo example
Pluvo automates financial root-cause analysis by tracing a variance through connected systems to the change that caused it, instead of leaving the chase to an analyst.
In practice, teams should define root cause analysis with a clear source, owner, time period, and decision before they use it in reporting, planning, or operating reviews.
Understanding root cause analysis matters because planning only improves decisions when assumptions, drivers, owners, and time periods are explicit enough to revisit when actuals arrive. Pluvo automates financial root-cause analysis by tracing a variance through connected systems to the change that caused it, instead of leaving the chase to an analyst.
A strong workflow for root cause analysis separates the definition from the action: first agree what the term means, then decide how it is measured, when it changes, and who is accountable for the next step.
Pluvo automates financial root-cause analysis by tracing a variance through connected systems to the change that caused it, instead of leaving the chase to an analyst.
FAQ
What is root cause analysis?
Root cause analysis is the practice of identifying the underlying cause of a financial result or variance rather than its symptom. For root cause analysis, the useful boundary is the driver, assumption, source data, owner, time period, scenario logic, and decision the model is meant to support.
How do you find the root cause of a variance?
To use root cause analysis, start with the decision, then confirm the source data, timing, calculation logic, and owner. The analysis is strongest when a reviewer can trace the answer back to the records that produced it.
Sources
- Root Cause Analysis: What It Is & How to Perform One Harvard Business School Online https://online.hbs.edu › blog ›online.hbs.edu
- A Step-By-Step Guide to Root Cause Analysis - IFAC ifac.org https://www.ifac.org › knowledge-gateway › discussionifac.org
- What is Root Cause Analysis (RCA)? ASQ https://asq.org › quality-resources › root-cause-analysisasq.org