What is Business Forecasting?

Forecasting makes informed predictions about future occurrences based on historical data. In business, these predictions regard future trends in a specific market, industry, or economy. Forecasting techniques are employed in risk management, strategic management, and financial management.

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How does Business Forecasting Work? 

Risk managers use forecasting to identify potential unfavorable situations or occurrences that could negatively affect organizational performance. This situations can occur externally or internally - both of which have an internal effect. Strategic managements use forecasting to predict elements of customer demand and occurrences within the competitive market or industry. Investors use forecasting to predict the events that can affect a company like those effecting sales expectations and share prices. Forecasting serves as an important benchmark for companies having strategic and operational planning goals. For example, stock analysts apply forecasting methods to deduce trends like future GDP or unemployment rates. Economists use environmental assumptions to analyze along with other understood environmental elements to understand cause and effect within an economy.

Qualitative and Quantitative Forecasting

Qualitative forecasting models rely on expert opinions to draw conclusions about future realities. Some of qualitative forecasting models employ market research surveys and polls based (often based on the Delphi method). Quantitative methods of forecasting do not include expert opinions and use statistical data comprising of quantitative information. Quantitative forecasting models entail time series methods, indicators analysis, discounting, and econometric modeling.

Related Topics

• Risk Management
• Forecasting (Business)
• Enterprise Risk Management (ERM)
• Operational Risk
• Business Recovery Risk
• Political Risk
• Asset Protection
• Performance Bond
• Barra Risk Factor Analysis Definition
• Forecasting (Business)
• Objective Probability
• Unconditional Probability