Financial Projections & ExplainingUncertainties
When doing a financial projection, it is important to alwayssomehow predict the financial cost of the unknowns and to havedetails surrounding those unknowns. Although they can be scary andcause worry, having detailed historical data or reason behind theuncertainty can help calm an audience almost immediately. Inexplaining a financial uncertainty, I would recommend starting withpointing out some positives based on the actual numbers. Thesepositives should be the based off of the forecast that was builtand defined. From here I would recommend briefly touching upon thefact that things sometimes don’t go as planned; a hurricane wipesout a town, a massive snow storm wipes the power from the state formultiple days or a competitor suddenly starts taking a portion ofyour customers. All of these things can’t be predicted and aretherefore uncertainties. Giving the audience context around whatthese uncertainties are helps build a solid foundation ofunderstanding.
From here I recommend that communication on the difference inthe uncertainty and the actual financial prediction are discussedin great detail. Everything should be outlined, starting with thiswas our predicted number, this was our final number and these arethe reasons we didn’t get to our actual number. It could be thatthere was an error in the number of days predicted in the month, itcould be that the sale Nordstrom rolled out wasn’t discountedenough to sell more products or simply that the number of peoplepredicted to make a purchase at Nordstrom was over projected. Asolid reason around why the prediction versus the actual occurredwill calm an audience.
Lastly, the audience wants to hear how this will be mitigatedgoing forward and factored into future predictions. Outlining thedetail around the uncertainty allows the predictor to learn andcomprehend what actually happened versus what was predicted so thathistorically they can better predict next time as well as aid incalming the audience.
For Chegg: constructively critique my explanations.Support your initial comment and response with sound reasoning andrelevant examples.
