By Andreas Simon, Director Sales MEA at Jedox
Arab Gulf nations weathered the turbulent economics of the Covid era with vision and grace. Swift action on stimuluses, decisive actions taken on pandemic management, and a range of other guidance and encouragement supported economic continuity.
PwC predicts robust economic growth in 2022 for the GCC, with non-oil activity, including FSI and construction, being huge elements of the post-pandemic recovery. Fitch Solutions also predicts growth in the region. Centering on the UAE’s rising oil output and an expected resurgence of its tourism sector, an August 2021 report from the credit-rating agency’s risk and strategy division predicts a “sharp rebound” for the country.
Increased competition is poised to separate enterprises by those who are prepared and those who aren’t. Even traditionally stable markets have become volatile, and accurate planning will be ever more important as a result. Risk management tends to spark debate among business stakeholders. Forecasts, some argue, have long been the standard for success. They form the backbone of budgets and strategy, putting hard data into spreadsheets for thorough digestion by decision makers. Apart from automating the data input itself, these traditionalists ask, “What else is there to do?”
Forward-thinking strategists emerge to answer this question. Disputing the efficacy as well as efficiency of the traditional approach to crunching the numbers, they point to the uncertainty and pace of change with which today’s businesses must contend and increased in the Covid era. They acknowledge that current reporting methods are inflexible and take so much time to prepare that they are out of date before they even reach the desks of stakeholders. These advocates for a new dynamic approach embrace the growing trend of rolling forecasts.
A change in culture
Instead of being guided by year-end numbers and forecasts that lead to the setting of targets for the following year, what about being able to take the pulse of the market more frequently and adjust your business accordingly? Rolling forecasts offer an invaluable tool to the region’s enterprises. Volatility is managed by reporting throughout the fiscal year, either as supplementary information to yearly reports or as a replacement for them. The timing of rolling forecasts are easy adaptable to the unique needs of the organisation and allow easily establishing custom reporting intervals that make sense to specific markets and operating models.
Rolling forecasts still predict performance metrics and deliver the same information as that found in year-end projections, plans, budget proposals and other standard company reports. But they do so more frequently, meaning enterprises become more predictive by nature. The act of looking forward is no longer something reserved for an Annual General Meeting. It is now part of the day-to-day culture of the business. In this new culture, business functions other than finance are able to benefit from forecasts. Sales, HR, warehousing, and IT can all make more strategic decisions with confidence. Amid the uncertainty of the pandemic itself, and the volatile side-effects felt in all industries both regionally and globally, rolling forecasts have significantly increased in usage.
Technology, of course
The successful adoption of rolling forecasts is underpinned by technology. And as with many digital replacements for legacy methods, they frequently run alongside traditional forecasts, meaning more work for the finance team. This situation can quickly become untenable. A specialised solution that automates processes, and unifies them where possible, is a vital component of embracing rolling forecasts. A modern solution will relieve financial analysts of the burden of data curation and produce quicker results, putting rolling forecasts at the fingertip of stakeholders.
Centralisation and unification of data is another important aspect of introducing rolling forecasts, to ensure uniform standards are applied to collection, storage, and usage. Another element is the stakeholders themselves. Open communication channels that allow department heads to have input into the design of reports, and how and when they should be delivered, is instrumental in ensuring success and part of successfully advancing the digital transformation journey and enabling rolling forecasts.
For rolling forecasts to be an effective countermeasure to volatility, it all starts with replacing the manual with the automated. Spreadsheets may still play a part in some aspects of the process, but they are no longer a source of manual labour for the finance department. Embracing higher frequency forecasts that offer higher accuracy and reliability are attained by technology more advanced than spreadsheets. Increased speed, accuracy, and reliability are all things that Artificial Intelligence delivers with ease. And modern solutions have evolved so much in recent years that advanced skills are no longer required to harness the power of AI.
More granular information models have long gone hand in hand with AI, particularly Machine Learning. With the leaps made in infrastructure and computing power, AI and ML can deliver real-time forecasts with accuracy rates above 90% in some cases.
Markets are unpredictable, but wherein there is challenge, also lies opportunity. The region’s businesses will face many obstacles as they vie for top positions in their post-COVID industries, but with the right technology and embracing a forward-thinking culture, rolling forecasts can enable accurate, actionable information in real time. Weathering turbulent times gets much easier with sustainable improvements to long-term business performance.