Posted on Sep 20
Forecasting: What It Is And Career Relevance
Company or business owners do not have to focus only on succeeding today but also need to project to succeed in the days ahead and work towards it. But projecting into the future should not be arbitrary. Rather, it should be a systematic process undertaken by well-trained professionals. Otherwise, it may end up being an exercise of futility and a waste of scarce resources. This is where sourcing for skilled forecasting professionals comes in.
What Is Forecasting?
In business, forecasting involves predicting future results by examining previous and present information/data. This process includes looking at market conditions, historical trends, customer behaviour, and other important factors to identify opportunities and risks. The primary aim of business forecasting is to create a well-informed estimation of upcoming events and situations.
The Business Forecasting Process
Business forecasting is a crucial process that must be planned and executed carefully. Here are the essential steps to create an effective forecasting plan:
- First, establish the forecast's objective and the relevant key performance indicators (KPIs) likely to help achieve it. For example, returns on investment (ROI), annual turnover, and market share.
- Collect appropriate data such as past KPI data, trends in the market, government regulations and other data capable of influencing the forecast.
- After gathering the data, analyse it to find trends, patterns, and other observations likely to affect the forecast. Depending on the nature of the data, the analysis can utilise any of the various data analysis methods available, including statistical and econometric models and machine learning algorithms, among others.
- Make your forecast on future expected KPI performance based on insights derived from analysing the data.
- To determine the degree of validity or accuracy of the forecast, compare it with the outcomes of past forecasts that used similar data collection instruments and data analysis tools.
- Once validated, the forecast can guide business decisions related to expected future performance, for example, adjustments in resource allocation, or changes in production strategies.
Because the business forecasting process often proceeds iteratively, it's essential to constantly monitor actual performance in relation to the forecast with a view to adjusting the forecast estimates, if necessary, in order to boost its possibility of accuracy.
The Relevance Of Forecasting
Forecasting is essential for businesses because it:
- gives decision-makers useful insights with which they can make optimal decisions, including the development of both short, medium, and long-term strategies for the attainment of organisational goals.
- enables organisations to allocate their resources optimally, for instance, through the use of budgeting.
- facilitates the identification of potential problems, uncertainties, and risks, allowing organisations to evolve strategies to manage such challenges.
- can help a company that is anticipating future growth or expansion to attract interest or funding from investors and lenders.
- is a good public relations exercise that promotes an organisation’s research and data management capabilities.
Guide To Learning Forecasting
To be good at business forecasting, you must develop passion for skills like data collection, data analysis, and interpretation. You must also have an above-average knowledge of subjects such as economics, finance, accounting, mathematics, and statistics.
For tutelage, a number of options are available. For instance, online educators such as Coursera and Udemy offer courses in forecasting. Alternatively, you can study courses in forecasting at formal tertiary institutions. However, in most universities, forecasting is usually studied as a course under a broader program, such as a bachelor’s program in business analytics, business management, or economics.
To brighten your career advancement chances, try to complement your work experience with postgraduate degrees and professional certifications.
Career Paths And Prospects In Forecasting
Business forecasting knowledge and skills can lead to diverse and exciting career opportunities. If you enjoy working with numbers, software, and other technological tools and making strategic decisions, you'll find a suitable job in this dynamic area. Here are some career prospects for you:
Business Analyst: Business analysts analyse data to gain insights and suggest changes for businesses and other organisations, based on the analysed data. A business analyst's main job is to enhance business efficiency by applying their understanding of both business operations and information technology.
Econometrician: Econometricians focus on using a combination of economics, mathematical, and statistical techniques and tools to collect, analyse and interpret economic data. They develop models used to predict economic variables like unemployment rate, GDP growth rate, and inflation rate, among others.
Quantitative Analyst (Quant): Quants blend economics/finance, computer science, statistics and mathematics to design complex models for a variety of purposes, for instance, optimising investment portfolios, pricing derivatives, and risk management. Some organisations that employ quants include asset management companies, hedge funds, and investment banks.
Business Intelligence Analyst: Business intelligence analysts are typically concerned with examining large data sets to uncover insights. They produce reports, dashboards, and visualisations to support decision-making, with forecasting being an essential aspect of their job.
Actuary: Actuaries primarily focus on assessing organisational risks and uncertainties. They make predictions that influence overall financial stability, for instance, in areas such as pricing and reserves. Places you can work with an actuarial science degree include insurance firms, accounting companies, and pension funds.
Financial Analyst: Financial analysts play a crucial role in forecasting teams. They conduct thorough analyses of financial data to identify trends and patterns that help in the development of predictions. Their responsibilities include financial statement analysis, investment analysis, competitor analysis, risk assessment, budgeting, and more.
Data Scientist: Data scientists leverage statistical methods and machine learning to anticipate future outcomes. Their work cuts across varying companies, from software development to manufacturing.
Treasury Analyst: Treasury analysts may oversee investment capital, cash flow, and liquidity in companies. They can also predict cash requirements, indulge in financial risk assessments, and optimise their organisation’s working capital.
Financial Planner: Financial planners help both businesses and private individuals reach their financial objectives. They develop tailored plans that may include strategies that can be used to invest wisely, retire comfortably, and manage risk effectively.
Conclusion
Businesses don’t need to focus only on today but must also project into the future and plan towards their projections. To achieve the best possible results, they need the services of trained professionals with forecasting skills. If you plan to explore a career in a forecasting-related area, there are lots of roles you can assume across a variety of companies, including those cited about above.
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