Fitch Ratings’ “Global Economic Outlook” states that global economic activity will decline by 1.9% this year with the U.S., Eurozone and UK GDP down by 3.3%, 4.2% and 3.9%, respectively. Some industries will be more impacted than others, and next to no one has historical experience with pandemic conditions.
Companies are clearly having a hard time planning. A survey from Gartner of 99 CFOs and finance leaders taken April 14-19 revealed that 42% of CFOs have not incorporated a second wave outbreak of COVID-19 in the financial scenarios they are building for the remainder of 2020, a finding dubbed “surprising,” by Alexander Bant, practice vice president, research, for the Gartner Finance. Many public companies have also withdrawn guidance due to lack of visibility.
So how do companies plan when visibility is so cloudy and unknowns are so numerous?
We, as well as the finance team at our partner, Workday, are embracing scenario planning — basically harnessing the power of “what if” — to respond to COVID-19, and so are many of our customers. The Workday cloud planning platform is processing up to 30 times more forecasts and build-out scenarios for customers than in a typical, pre-pandemic week. And given the volatility and unpredictability we’ve seen, it’s not likely to ease up soon.
But the reality is that agility starts with planning. Not long before the pandemic hit, we, like many companies, had our plan in hand and were evaluating many different potential outcomes, including whether the long-running economic expansion would begin to show signs of slowing. As the realities of the pandemic came into view, we stepped up scenario planning in order to adapt to changing market conditions–and achieve the level of agility our business demands. And, while we continue to adjust and adapt like all companies, we identified five critical steps for successful scenario planning.
(For further insights on the benefits of agile planning, download "Practical steps for business agility")