Budgeting and Forecasting
Feb. 7th, 2010
Impacts on Forecasting
Identify a minimum of three current environmental conditions that would impact the preparation of a forecast. Explain how and why they would impact a forecast. Examples are weather conditions, government regulations, war, political unrest, etc.
A business forecast could be severely affected by any sort of unpredictable and often unpreventable environmental circumstance. Several of these environmental conditions that would be detrimental for forecasting would be such events as weather conditions, economic unrest, and war. Weather conditions, although they can be predicted to a certain degree, often cannot be prevented. For example, natural disasters may occur, which would deter any company’s forecast. Another environmental impediment could arise from economic unrest. In such a case there may be unregulated ...view middle of the document...
Another example would be a bakery because in the case of snowstorm or flood, as we often experience in south Florida, it signifies the loss of a whole day’s profit. This can be especially bad when more severe weather conditions happen, such as hurricanes. In south Florida, for instance, when hurricanes happen they simply cannot be prevented and businesses do suffer because they are shut down for days or weeks at a time, setting back production and sales.
Economic unrest can also make predicting a forecast very difficult. Economic unrest can bring on several conditions that can derail a forecast. For example, we are currently still going through an economic recession and this has meant a decrease in sales for many different businesses. Although the recession is a few years in now, the first year a recession starts many business are not expecting it and forecasts may go terribly wrong. The effect of a recession can result in very low sales for business like car dealerships, jewelry stores, hotels, and very low property sales as well. In this case economic unrest may deter a forecast to the point that a business might have been o unprepared for such events that they might have to shut down all together. Many private businesses that do not incorporate such possibilities into their forecasts may even be forced to declare bankruptcy and forfeit their entire establishment.
Lastly, an unpredictable even such as war can make it virtually impossible for a business to develop an accurate forecast. Not only does an event such as the beginning of a war affect businesses on a local basis, but it affects every individual of a country and therefore the entire establishment of society itself. War can mean unemployment do to employment cuts in major corporations. This, in turn, can mean significantly reduced profits for such corporations. War time can make forecasting impossible in that it is unpredictable to foretell when a war will begin, how long a war will last, or what the negative effects will result. Wars can last years and this could mean years of unpredictable consumer demands, employment rates, and financial turmoil.