Traditional planning processes and forecasts are unsuitable for steering companies in a crisis

The Covid-19 pandemic presents enormous challenges for controllers and planners. Uncertainty always makes forecasting tricky, and in the last 65 years, there has never been more uncertainty than today.

In mid-March, volatility on the global financial markets reached an all-time high. Though markets have stabilized, volatility has yet to return to pre-crisis levels. There is also a record level of economic uncertainty. In Germany, business confidence in economic development fell rapidly – the ifo Business Climate Index plummeted in March and April before rising again slightly in May. According to the Federal Statistical Office of Germany, the change in Germany’s price-adjusted gross domestic product in the first quarter of 2020 was -1.8% year-over-year, and-10.1% in the second quarter year-over-year. Such sharp declines make it challenging to forecast GDP for 2020 with any degree of accuracy: instead of forecasts in exact percentages, only forecasts with broad ranges are currently published.

With their variances and the hardly predictable course of the pandemic, such statistics pose significant challenges for planners and controllers. Baselines from previous periods always had been reliable; now, they are mostly useless. Structures and processes must be adapted to respond to the rapidly changing environment of a crisis.

Based on BearingPoint’s experience, a crisis can be divided into four phases: shock, cost savings, restructuring and consolidation, and restart. The four phases place specific demands on planning and forecasting processes during a crisis. Crisis Mode requires an immediate effect and action-based rolling forecast. Medium-term and budget processes in the ‘next normal’ crisis mode require focused planning. In addition, the crisis also offers the opportunity to accompany the preparation and restart with optimized planning. In the following, three major adjustment requirements in the planning process during the crisis are described:

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