Forecasting in the “Fog”

Posted by Peter Orr on Mar 12, 2009

"…companies are finding their standard budgeting and forecasting of little use. The usual trick of plugging figures from operating units into spreadsheets appeals to number-crunchers, but can often generate misleading targets, especially when conditions change fast."

"Managing in the fog" Economist, February 28, 2009

Even when markets change "slow", to me the point is that they're going to change! And many (perhaps most!) critical capital/corporate planning decisions are based on the spreadsheet building prowess of one or more relatively junior professionals in treasury or the CFOs office. Is this really the way we should operate, particularly after what's happened to markets in the last 18 months? I sure hope not, it seems the Economist does too…

"…more companies should be using 'scenario planning' alongside their financial models, which do not produce a large enough spread of possible outcomes to capture the flavour of today's uncertainties."

"Managing in the fog" Economist, February 28, 2009

Sounds good to me. But what are you YOU doing to help improve your financial decision making?