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Future-Proofing Forecasting

An important and durable lesson of recent massive disruptions is that organizations need to forecast and plan with agility so they can quickly adapt to evolving economic, market, legal, regulatory and behavioral conditions. Organizations that have invested in dedicated software to improve their forecasting and planning processes should enhance the accuracy, predictive potency and business value of these systems by explicitly incorporating a blend of internal and externally sourced predictions of the factors that drive outcomes. Considering internal plans in the context of external forecasts from reliable sources provides senior executives and the financial planning and analysis (FP&A) group a check to ensure that assumptions about demand, supply, costs and other key factors are not at odds with credible third-party forecasts. Moreover, organizations can use these sources of data and intelligence to detect early warning signals of diverging trends—positive or negative—in their environment that they otherwise would miss. Being able to detect reliable predictive signals sooner enables organizations to adapt and stay a step ahead of the competition while minimizing financial and operational risks.

Over the past decade, technologies have emerged that make it feasible and practical for organizations to incorporate external intelligence and data in their planning, analysis and reporting processes. The most effective planning incorporates external sources because organizations do not operate in a vacuum. As FP&A groups increasingly use predictive analytics and artificial intelligence (AI), an external perspective will become essential to creating models and forecasts with strong predictive and explanatory power over a wide range of planning scenarios.

 
 

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About the Author

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Robert Kugel

SVP and Research Director
Ventana Research

Robert Kugel is responsible for the Office of Finance and business research, focusing on the intersection of information technology with the finance organization and business. His research agenda includes the application of IT to finance and business process optimization, looking particularly at ERP and continuous accounting, financial performance management, predictive planning, price and revenue management, revenue and lease accounting and robotic finance.