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:

Crisis Mode: Overcome the shock phase through transparency and a high-frequency effect and action-based rolling forecast

The first phase of crisis management through performance management is in full swing. The focus of planning and forecasting is on creating transparency and creating a clear picture of the situation. 

The following aspects are in the foreground:

  • Shorten the planning cycle - Instead of medium and long-term forecasts, weekly or biweekly forecasts and reports make sense. The aim is to significantly accelerate planning and forecasting work with agile processes and reduced data sets.
  • Adapt forecasting methods - Forecasts should build on the pre-crisis baseline and consider immediate effects and measures (e.g., profit and loss statement). Based on this, your forecasting team can create a weekly or biweekly COVID 19 scenario for the business and stress test it for worst-case stressors (e.g., 50% revenue loss) and trigger points (both financial and pandemic). In the subsequent analysis, the level of revenue loss that your company can withstand can be defined, providing information about short and medium-term adjustment needs in planning measures and structures.
  • Postpone non-critical tasks - During the crisis phase, it may make sense or be necessary to postpone tasks with a medium or long-term planning horizon (such as assumptions, comprehensive strategic planning and mid-term planning as well as detailed budgeting).

Next Normal: Focus on planning and forecasting  

Many companies are already or very soon will be transitioning to the second phase, in which cost savings are the focus. It builds on the approaches introduced during the shock phase. Now new approaches to planning and forecasting must be adopted to deal with the continuing high uncertainty level. As noted in the shock phase, the planning and forecasting processes characterized by annual, quarterly or possibly monthly rhythms need to be changed to a one to two-week rhythm.

This results in the following recommendations for action:

  • Form a separate crisis team - The team should analyze the effects and measures the crisis is having on the company and ensure that the right steps are implemented quickly. This crisis team should include managers from all areas (both operational and financial) (usually 15 to 30 experts).
  • Focus on the key performance indicators - Cash flow and EBIT. Upstream, time-consuming and decentralized functional planning processes, such as sales planning, should be replaced by faster processes that focus on effects and measures.
  • Free up management capacity - Through a centralized process that makes greater use of decentralized know-how to plan effects (e.g., the impact of concrete market changes on individual or several lines of the income statement) and derive concrete measures (e.g., short-term reduction of infrastructure costs). The effects and measures offer greater flexibility in times of crisis and tie up less capacity within the framework of rigid medium-term planning, which results in less resilient budgets.

Dare to restart with an optimized schedule

The new start should begin with the phase of restructuring and consolidation. While in previous phases, the focus was on short-term planning horizons to stabilize liquidity and operational profitability, attention must now be paid again to medium to long-term planning. Optimization of planning must be accompanied by a performance management transformation aimed at managing future growth.

The following aspects are of particular relevance in this context:

  • Early recognition of growth at the turning point - A crisis offers not only risks but also opportunities. However, opportunities must be recognized in time and the appropriate initiatives launched. If you can initiate corporate growth before your competitors, you will gain a significant competitive advantage and market share.
  • Prepare for internal and external growth - When recovery from the crisis sets in, you should not only think about the opportunities for organic growth but also review expanded M&A activities.
  • Manage growth for success - The development and prioritization of concrete and quantifiable measures in terms of resource requirements for internal and external growth must be prioritized. Optimizing planning in this direction often requires management to become more flexible and provide suitable measuring instruments to support the acceleration of planning and forecasting.


When taking new directions in planning and forecasting, we have noticed many clients subordinating the handling of budget activities, usually carried out in summer and autumn. On the one hand, this is due to the necessity of making short-term forecasts, including effects and measures. On the other hand, conventional planning and forecasting cannot cope with the current crisis and the increasingly dynamic environment. The crisis offers the opportunity to review which planning processes can be centralized and focused in terms of content. The growth phase associated with the restart requires a consistent orientation of planning processes towards growth.

Promising examples already exist, and BearingPoint has related references, project experience and methods. Let us work together to meet the challenge of managing the crisis and gain market share in the restart through early growth.
Financial forecasting must adapt in the face of the pandemic. Learn how to build long-term resilience – contact our experts today.

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