Forecasting & Scenario Planning in the midst of Covid-19

In Process Improvement by Mark Harrison

Reading Time: 3 minutes

How you respond to the challenges the pandemic has visited upon us will define the way you recover and reinvent yourselves tomorrow

Covid-19, hands up all those who saw that coming when they were doing their forecasts and budgets last year?

Thought so, no one. It is not as if we weren’t already trying to figure out the impact of Brexit, hard, soft or somewhere in between or climate change, potential trade wars with China disrupting fragile supply chains to name just the headline challenges. These are unprecedented times we live in.

Covid-19 has greater more far-reaching effects as uncertainty regarding the duration of the pandemic leaving us in the dark as to how long it will be until we can retake control. No country or sector, company, or executive team will be immune from Covid-19’s impact and consequences.

The choices and strategies you had relied upon for years will not survive in their current format. We are in unchartered territory and how the events unfold before us is yet to be seen.

I played rugby in the ’80s and ’90s and was a fly-half. You were always sent out with a rigid game plan which you were told to stick to at all cost. I was never a big fan of this and tended to play what was happening in front of me, usually, it went well but routinely involved me getting dropped if it didn’t. In spite of the consequences, I stayed true to my bohemian approach but finding a middle ground would have been cleverer.

The challenge for businesses right now is to find that balance between a plan that makes sense in the market you are in and the ability to react to what is happening in front of you in real-time as there are no historical precedents to give you guidance of what will happen during and after a pandemic.

The longer the pandemic goes on, the financial impact becomes more apparent. Businesses must proactively and constantly be assessing and stress testing their business models and strategic plans.

It doesn’t all have to be bad, the pandemic gives us all an opportunity to reassess and reinvent ourselves and our businesses and how we do things. Much of our current cost base and working practices have their roots in a time when we weren’t able to work from home or have the technology available to us that we do today, in particular when it comes to collaboration. We all go to the expensive city centre offices because we always have, not because we need to, it is behaviour that has never really been questioned before.

How much of what we do at work makes a difference, or is genuinely productive? It’s time to strip it all down and put it back together in the best possible way.

The more progressive businesses will emerge from this with a growth mindset and more efficient, agile, and streamlined businesses with a competitive edge. They will be the winners in the post-Covid-19 world.

The Covid-19 crisis will require us all to adopt new working styles, such as real-time decision making and scenario-based forecasting. Those who do will be able to quickly model the changes they are facing and develop a recovery plan leading to long-term reinvention and they will prevail.

The need to use all the data points available to us whether internal or external in robust and regular scenario planning has never been more important than it is now. This will allow organisations to identify priorities, run a number of scenarios and assess the impact of those scenarios on revenue, OpEx, CapEx, your balance sheet, and cash flow but also across the business operationally including, workforce, product lines, inventory levels, and many more. Scenario planning will allow you to simulate the cause and effect of your planned actions across your whole business.

The uncertain times we find ourselves in will require companies to be bold but move forward with clarity and humility that they may not have had up to now. Your enemies now are poor data, poor preparation, procrastination, and hubris. The winners will have well-executed, stress-tested plans that mitigate risk. Scenario planning is a key skill for any business in the current and post Covid-19 world.