Businesses are under unprecedented pressure to urgently answer complex questions.
A new reality is upon us with retail closures, production shutdowns, supply chain disruptions, workforce restructuring and closure of borders. While some businesses will obtain a form of government assistance, this might not be sufficient.
Your cash flow, debts, customer flow and supply chains will be impacted and finance teams will face increased pressure from internal and external stakeholders to re-forecast cash flows and perform scenario analysis.
Ask yourself the following questions:
Do my budgets and forecasts still make sense?
Can my forecasting tools answer the questions being asked?
Am I deploying my resources efficiently and in the right direction?
Forecasting in the face of uncertainty
Management teams are under unprecedented pressure to urgently answer complex questions.
Consider the impact of...
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And its implication on...
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A three step approach
Can my forecasting tool answer the questions being asked?
Many scenarios are whole-of-business and phased over time
Forecast tools must have the flexibility to consider upside and downside scenarios, including impacts of fixed, variable and step-variable costs as well as sales and operational planning issues (e.g. supply chain)
New lenses applied to budgets and forecasts, such as discretionary vs non-discretionary vs contracted spend
Ensuring the model tells the story at the right level, e.g. forecasting weekly cash vs monthly; forecasting below EBITDA for true cash position
Analysis delivered under pressure is reliable and revised models are robust and designed to cope with future changes.
Do my base case assumptions reflect new realities and possibilities?
You must have robust, defensible and up to date forecast assumptions/drivers to allow you to confidently communicate the expected impact on your business, supported by a description of the base case environmental assumptions and “what you have to believe”
Communicate base case broad assumptions to ensure all teams forecasting off of “one source of truth” and not inconsistent assumptions
Reconcile to most recent budgets or re-forecasts
Identify your up-to-date external data sources (eg WHO, Governments) and link to your business drivers
Obtain data of the impact of comparable incidents and shocks
What have been the impacts / reactions for similar businesses globally
What happens if I pull the levers I have at my disposal?
- Product prioritisation and demand substitution
Raise short-term capital aligning capital mix decisions to expected impact
Ramping down / up production
Re-rank all investment/expansion business cases vs ROC and priorities
Postponing or rapid elimination of non-critical spend / expansion activity
Re-negotiating lease, supplier and capital contracts
Suggested next steps: Rapid Scenario Planning and Business Intelligence Exercise
PwC can run a Rapid Scenario Planning and Business Intelligence Exercise which will generally consider the following:
Rapid assessment of your current state forecasting and scenario planning capabilities
Can your forecast tools be updated rapidly?
Do they have the right level of granularity to answer questions being posed?
Are your sales and operational planning tools agile enough?
Rapid development of tactical models to deliver the analysis you need
Strategic business forecast models to pull the major business levers
Strategic cash flow models based on value drivers that are under threat and assess impact on covenants, cash etc.
13 week cash flow models that assess short-term cash demand and quantify the cash run, introduce a cash culture and communicate confidence to stakeholders.
Data models to create a single source of truth
Tactical targeted BI solutions to quickly extract and publish reporting dashboards
Validate your assumptions
Leverage your existing data to provide better business intelligence supporting your forecast assumptions (e.g. extracting data on demand and supply chain trends by SKU/region)
Deliver fast targeted tactical data analysis exercises to validate the key hypotheses.
Embed reporting to allow ongoing analysis and assessment as the situation evolves.
Validate your assumptions using external data sources, global trend data and lead indicators.
You are not alone. We are here to help.
A dedicated financial advisor can look into your business and propose combination of the following solutions:
- Driver based strategic planning models that forecast cash flows under various scenarios.
13 week cash flow models to assess short-term cash demands and cash runway.
Tactical Data and analytics provide business intelligence for forecast assumptions.
Predictive forecasting provide insights into demand forecasting and risk assessment.
Financial model review to enhance confidence in the integrity of your tools.
Board paper development to provide an outside in perspective.
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