It’s actually quite strange – an anomaly – given the rapid rate of change that pervades the corporate environment, the unstable political scenarios, economic uncertainty, climate change, technology advancement to name a few, how some companies seem to sail on untouched by the turbulence .
Seemingly oblivious of these challenges, calmness prevails and as if they are aware of a positive destiny.
I am sure you have seen such companies, or perhaps are part of that environment.
Far from the madding crowd, they stick to their course.
The question that arises, of course, is are they so secure in their particular business space, or
perhaps, even better, a monopoly, or is it just good luck favouring the brave?
Perhaps they have little or no competition, or their products are essential to our survival.
Is it a matter of good luck – or good management?
If one produces a comparative list of the top 20 companies, say a decade or more ago, and a similar list of companies in todays world, the changes are significant.
So present success does not automatically guarantee future success.
The reality is that business are dynamic, subject to the ebb and flow of many factors, economic, political and social – legislation and climatic – and only the fittest or most nimble survive.
Some years ago I had the pleasure of meeting Clem Sunter, South Africa’s leading scenario planner – and was introduces to a whole new level of business planning.
Clem has an illustrious career in business, and as an author and speaker!
Readers will know how passionate I am about financial modelling, and the significant benefits financial models provide for company performance, evaluation of strategy and project feasibility.
There is no better form of managing corporate performance – assuming that the models is an accurate representation of the complete business case and is built following best practice methodology.
Typically models have a time horizon from as little as 5 years to a maximum of 20 years, with individual time series varying from monthly to annual periods.
Realists will however acknowledge that models are predictive and our ability to “predict” finite values with precision is subject to increasing margins of error.
Clem has a simple way of demonstrating this point.
It’s called the Cone of Uncertainty.
Whilst scenario planning and financial modelling are both predictive in nature, scenario planning considers a number of broad based potential scenarios, based on the current state of affairs and the offers different possibilities and outcomes to each scenario.
It has undoubted value for long term and alternate strategies.
I recommend his book- “Thinking the Future” – 2021 – for some interesting and thought provoking reading.
Financial Modelling is by its very nature much more definitive (precise), and model drivers, input assumptions, model structure, and correct formulas and functions are critical.
And, of course, models are deliberately flexible to allow users to alter key drivers based on current circumstances and address the issue depicted in the Cone of Uncertainty.
As defined in the FAST international modelling standard, the F stands for flexibility – a key requirement.
If you want to learn more about the benefits of financial models, send me an email –
colin@goalfix.co.za – or call me.
Good luck in planning the future of your company.
The ultimate solution is a combination of scenario planning and effective financial modelling.
