Businesses must engage in scenario planning to avert economic shocks, says Dr. Vera Fiador
A senior lecturer at the University of Ghana Business School (UGBS), Dr. Vera Fiador, has urged entrepreneurs and start-up businesses to plan more often than before especially given the volatile economic situation.
According to her, it is imperative for businesses to engage in scenario planning more than ever.
Ghana’s current economic quagmire has been described by some analysts as a result of overly-choked fiscal space and government’s appetite for rolling out revenue-consuming programmes whilst its revenue mobilization efforts yield no better results.
With the cedi depreciating big against the dollar and prices for commodities soaring as well as inflation for July according to the Ghana Statistical Service inching up to 31.7 percent, and the central bank raising the policy rate to 300 basis points, in a bid to tame inflation but that notwithstanding businesses have expressed concern about rising prices and difficulty in doing business.
Speaking at an SME Business Development webinar under the auspices of Absa bank last Thursday, Dr. Fiador suggested that businesses should review their activities and plan on quarterly basis.
“At this point you will need to be doing this more frequently and also make room for a lot of scenario planning -because now you are seeing trends that you did not anticipate and so the question then will be do you need to scale down one or two functions whiles you manage another, your planning should be more frequent than you anticipated, it does not make for a comfortable job but as it happens managing during a crisis period, is actually what comes with it and at this point you could say that in view of the myriad elements that are flying all over the place; from our exchange rate situation through to the inflationary trends and cost of capital implication.
“What it means is that, planning is even more critical because the assumptions keep on changing, once you could have planned for the longer horizon sometime back, now is going to be much shorter, you come back to the table to do another element of scenario planning to see what has changed and how you may want to adjust to fit the change before it actually does you in,” she stated.
Dr. Fiador who spoke on the topic “Effective Financial Management” indicated that effective financial management was vital for business survival and growth, stressing that it was key for businesses to prioritise financial planning as well as develop risk management framework.
Ghana is in the early stages of negotiating a support deal with the International Monetary Fund after initially saying it would not turn to the fund for help.
