Page 167 - Finanancial Management_2022

Traditional forecasting

methods have been found
lacking, so follow these
steps to enhance quality

— starting with alignment
on the forecast’s purpose.

By David A. J. Axson

he last few years have seen
unprecedented risk and
volatility, making the task of
forecasting financial
Tperformance fraught with
uncertainty. The cumulative impact of
COVID-19, global supply chain
disruptions, war in Ukraine, and surging
inflation has upended traditional
methods for developing forecasts.
Techniques such as trend analysis,
variance to budget, and rolling forecasts
have been found lacking at a time when
insight into possible future performance
has never been more important.
No industry or geography has been
immune. In June 2022, US Treasury
Secretary Janet Yellen admitted she was
wrong to forecast that inflation would be
a temporary blip. Oil prices surged from
$65 to $120 a barrel between December
2021 and March 2022. The global rate of
inflation more than doubled in the year
to March 2022. Inventory levels in many