Budgeting and forecasting in the new world order

Today, the most useful budgets and forecasts aren’t necessarily the most accurate. Instead, they are the ones that best prepare our clients for multiple possible futures. Ones that allow for swift recalibration and set clear triggers for strategic shifts.

Writing this in February, for publication in April, I wonder what the world will look like when this article appears. If the first six weeks of 2025 are anything to go by, almost nothing would surprise me.

So far this year, we have seen an escalation of the biggest shift in the global balance of power in decades. Most headline-grabbing is the US’s on-again-off-again trade tariffs on its largest trading partners, and their unsurprising immediate responses in kind. But this is part of a larger movement towards isolationism – remember Brexit? And the trend seems to be gaining alarming momentum across the West.

The global economic order is fracturing, and traditional alliances are dissolving. But nature doesn’t like a vacuum, and as existing economic relationships disappear, new ones are likely to form. The BRICS nations appear well-placed to step into the gaps left by these international bust ups. For instance, China has already signaled its willingness to grow economic ties with Canada as trade tensions escalate with the US.

Whatever your stance is on this shift, the implications for business planning and forecasting can’t be overstated. Companies need to start preparing now for multiple possible futures. For us as accountants, that means reconsidering our approach to forecasting and budgeting, which form the bedrock of financial planning.

Traditional budgeting processes often rely on historical data and relatively stable assumptions about market conditions. But now, we need to plan effectively amid unprecedented volatility. It’s not just the magnitude of the changes that is a challenge, it’s the speed at which they happen.

I’d suggest that instead of seeing forecasting and budgeting as annual exercises in prediction, we start to view these activities as dynamic tools for scenario planning. This means developing flexible frameworks that can adapt to changing circumstances while maintaining enough structure to guide decision-making.

Consider a South African manufacturer who previously relied on established Western-centred supply chains. Given current events, they might need to simultaneously explore alternative suppliers while also positioning themselves to serve new markets emerging from global trade realignments.

For accountants, this means evolving our role from being guardians of historical accuracy to becoming strategic advisers who can help our clients access the tools and necessary agility to navigate uncertainty. Our job is to make sure businesses have the financial flexibility to handle whatever comes next. Because frankly, today, that could be anything.

The maze keeps changing

Remember Spencer Johnson's "Who Moved My Cheese?" – the business book that, 25 years ago, spoke to a generation of traditional businesses seeing their world change thanks to the dot-com boom, globalisation, and technological upheaval? Its message was simple and reassuring: forget about the old cheese, and look for new cheese elsewhere in the maze. Today though, the challenge seems to be that the entire maze keeps changing. And the best advice for navigating this changing maze isn’t in trying to predict exactly what will happen, but in building the capability to respond effectively to whatever does happen.

As published ASA Magazine - April 2025