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Forecasting Quality

Managing forecast risk

By John Stretch, Management education in finance and banking

As we enter 2017, many companies are busy finalising their annual budget. But how do you budget in a world where the best economists cannot predict the future? Perhaps the only approach is to prepare a budget as best you can, live with the uncertainty and then adapt to it and respond very fast when the future eventually happens.
This may explain why organisations have converted their annual budget process to a dynamic system of rolling forecasts.

The not So Obvious Facets of Budgeting and Forecasting

By Timo Wienefoet, Managing Partner at IMPLEXA GmbH

No matter for a budget season or a continuous forecasting: the human factor is randomly covered in the process that may bring the best and the worst of management culture. A special eye on bias during the Performance Management and goal setting process is essential for process quality and to the FP&A skillset.  Missing the mark is suboptimal and settling for the wrong one has dire consequences for the company. Hopefully, it does, because planning without effect qualifies the planner as irrelevant to the business.

Time to shed light on the behavioral side of financial planning. With a twinkling eye, the not so obvious psychological patterns unexpectedly surface during every planning season.

„The greatest danger for most of us lies not in setting our aim too high and falling short, but in setting our aim too low, and achieving our mark.“ (Michelangelo)

A New Approach to Business Forecasting

By Steve Morlidge, Business Forecasting thought leader, author of "Future Ready: How to Master Business Forecasting" and  "The Little Book of Beyond Budgeting" 

Many millions of people are stuck with the habit of smoking. They know its bad for them and it will eventually kill them, yet they continue. They may have tried to quit many times but they are stuck in a rut. Experience has shown that to successfully break habits you must stop things as well as start doing new things.

The current practice of management exhibits some very bad habits. One key cause is an underlying philosophy of “command and control.” Managers know it is bad for them and it kills motivation, initiative, flexibility and innovation on a daily basis.

The 11 Commandments of Supreme Forecasting

By Timo Wienefoet, Managing Partner at IMPLEXA GmbH

The Superforecasters were assessed according to Brier scores. A certain mindset combined with a resolute feedback environment led to extraordinary results. Philip Tetlock, author of "Superforecasting: The Art and Science of Prediction", came up with 11 methodical commandments that can be followed to attain  supreme forecasting skills.

      Quality of FP&A: Managing Biases within Financial Analysis

      By Karl Kern, Founder/President, Kern Analytics LLC

      One can find many definitions of financial analysis.  Investopedia defines financial analysis as “the process of evaluating businesses, projects, budgets and other finance-related entities to determine their suitability for investment.”  Wikipedia defines financial analysis as “the assessment of the viability, stability and profitability of a business, sub-business or project.  Practitioners of financial analysis may have their own definitions.  As a practitioner of financial analysis, my definition is “the process of learning about a business in order to understand what it is doing and where it is going.”

      I like to emphasize the word “learning” within my definition because learning is not a perfect process.  Human beings will take steps within the process that fail to acquire the necessary insight into what a business is doing and where it is going.  The steps that lead to failure within the learning process are called biases.  Biases are real within the financial analysis.  One cannot eliminate biases but one can manage them.