Financial Projections & Explaining Uncertainties

When doing a financial projection, it is important to always somehow predict the financial cost of the unknowns and to have details surrounding those unknowns. Although they can be scary and cause worry, having detailed historical data or reason behind the uncertainty can help calm an audience almost immediately. In explaining a financial uncertainty, I would recommend starting with pointing out some positives based on the actual numbers. These positives should be the based off of the forecast that was built and defined. From here I would recommend briefly touching upon the fact that things sometimes dont go as planned; a hurricane wipes out a town, a massive snow storm wipes the power from the state for multiple days or a competitor suddenly starts taking a portion of your customers. All of these things cant be predicted and are therefore uncertainties. Giving the audience context around what these uncertainties are helps build a solid foundation of understanding.

From here I recommend that communication on the difference in the uncertainty and the actual financial prediction are discussed in great detail. Everything should be outlined, starting with this was our predicted number, this was our final number and these are the reasons we didnt get to our actual number. It could be that there was an error in the number of days predicted in the month, it could be that the sale Nordstrom rolled out wasnt discounted enough to sell more products or simply that the number of people predicted to make a purchase at Nordstrom was over projected. A solid reason around why the prediction versus the actual occurred will calm an audience.

Lastly, the audience wants to hear how this will be mitigated going forward and factored into future predictions. Outlining the detail around the uncertainty allows the predictor to learn and comprehend what actually happened versus what was predicted so that historically they can better predict next time as well as aid in calming the audience.

For Chegg: constructively critique my explanations. Support your initial comment and response with sound reasoning and relevant examples.