Coronavirus forecasting: what you need to be thinking about

The coronavirus pandemic is having an impact on business operations across the UK. In these uncertain times, effective forecasting and scenario planning will play a significant role in commercial and operational decisions over the next coming months, as well as assisting confident communication and negotiation of a business’s plans with funders and stakeholders to ensure ongoing support.  

It is now necessary for businesses to significantly recalibrate their short- and longer-term forecasts, not just for the impact on trading of the crisis, but to also to take account of the most recent government grants, loan schemes such as Coronavirus Business Interruption Loan (CBIL), deferred payment regimes, and other support packages as they become available.  

A lot of financial models are built to forecast under ‘conventional’ business scenarios and may no longer be fit for purpose as businesses try to adapt to this ‘new normal’. Typically, financial models are built with a medium-term outlook and are often rigid and inflexible in structure. Many models are simply not designed to readily and robustly incorporate changes in what is currently a fast-moving environment. Many more will also not have the granularity or functionality to support short term forecasting.

Below, we have outlined four key areas for businesses to consider when reviewing their current financial model capabilities:

    Short term cash flow forecasting tools

These will support operational decisions to manage cash now and where businesses need to demonstrate overall liquidity in order to maintain funder support 

  • Is your current financial model robust, flexible and capable of producing near term cash flow forecasts (e.g. weekly over 13 weeks)? 
  • Does your current financial model require a retrofit to adapt to the current changing environment? 
    Scenario planning models and analysis

These support medium to long term decision timeframes and management of funders and other stakeholders in the near term

  • Do you have a reliable and up to date strategic planning model capable of running sensitivity analysis and scenarios?
  • Does your business need assistance conducting 'what-if?' testing and analysis on your operational plans and financial restructuring? 
    Forecast validation and assurance

This provides confidence to lenders and stakeholders that forecasts are accurate and well-constructed, particularly where the trading forecasts have been materially impacted and there is reliance on the Government support mechanisms.

  • Are you confident in the reliability and accuracy of your forecasting tools?
  • Does your forecast take a long time to update and validate?
    Data analysis, troubleshooting and problem solving

As the economy reacts it will be key to understand and optimise the implications of emerging trends in your business data. These will help manipulate, evaluate and understand complex data sets, help to develop bespoke calculation tools and provide visualisation and insights.  

  • Do you have a clear grip on your data?
  • Has the crisis revealed gaps in your data capture or analytical capability?
  • Can you readily visualise and explain data to key stakeholders?

Our team of expert financial modellers have an in-depth knowledge in providing modelling services across a wide range of sectors, including retail, travel and leisure & hospitality, which have been significantly impacted by the crisis very early on. 

If your business is facing any of the issues outlined above, please contact 

Alistair Hynd Alistair Hynd

Partner