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Financial planning in uncertain times

14th March 2018

Financial planning in uncertain times

By Paul Cooper,
Redland Information Systems
paul.cooper@redlandis .co.uk
March 29th 2018

Originally written in May 2017 but still relevant as the Brexit process continues to affect business planning.

The United Kingdom has begun formal negotiations to leave the European Union. This process is scheduled to take two years, until May 2019, during which time (at least) businesses will face economic, trading and legislative uncertainty. Business planning, allowing the flexibility to model differing scenarios based on changing variables, will become increasingly important.

In my opinion Brexit has highlighted the importance of scenario planning in order to account for uncertainties. Historically scenario planning has been used when dealing with crises but the time has come to consider it as a regular business practice.

It is tough enough to plan for the future of your business based on KNOWNS. Using known historical data from previous trading years, both inside your company and other relevant data sources, you can prepare budgets, plans and forecasts. Brexit planning introduces additional layers of uncertainty based on having to factor in UNKNOWNS.

This brings to mind the now famous (or infamous) quote from former United States Secretary of Defence Donald Rumsfeld.

“Reports that say that something hasn’t happened are always interesting to me, because as we know, there are known knowns; there are things we know we know. We also know there are known unknowns; that is to say we know there are some things we do not know. But there are also unknown unknowns – the ones we don’t know we don’t know. And if one looks throughout the history of our country and other free countries, it is the latter category that tends to be the difficult one”.

What I do know is that the organisations that thrive throughout the Brexit process and beyond will be those who keep on top of the factors causing business uncertainty. Flexible scenario planning, in the form of a state of the art Planning, Budgeting and Forecasting system, offers businesses the opportunity to develop multiple scenarios/models based on what you know and what you do not know (but can surmise multiple possible options). Without a Planning, Budgeting and Forecasting toolkit such scenario planning would be beyond the scope of manual or even spreadsheet-based systems.

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