Check out the summary of what 2020 was like with a focus on financial management and the forecasts of potential scenarios for the upcoming year.
It’s no surprise when I say that 2020 was a year of uncertainty. The Gestão da Crise portal, which I maintain, wasn’t planned in 2019, but rather in the early days of the pandemic.
The second half of March marked a turning point in Brazil. Companies began to realize that the situation was more than just a “little flu” and that something uncertain was happening—something that would lead to a crisis. And that’s exactly what happened.
A general panic set in at the end of March and beginning of April, as seen in the stock market quotes, and the scenario was much more aggressive for those who didn’t have their financial management up to date and well planned. By June, we were starting to understand the direction things were taking, beginning to grasp the trend.
By the start of the second half of the year and continuing to this day, some sectors managed to hit record sales and revenue. For example, furniture sales have never been as high as they are now. The real estate market is also booming. With the government’s R$600 emergency aid, along with economic measures that had a positive effect, many sectors faced challenges due to a shortage of raw materials.
Financial Management: The Decisive Factor
In the Conversation with Executives event, organized by Gestão da Crise, relevant reflections were shared about the challenges in the post-pandemic era, and you can access it by clicking here. Some sectors are still in crisis, with no sign of improvement, such as the travel and entertainment industry as a whole.
As mentioned earlier, 2020 was a year of great uncertainty, and only those who were prepared in 2019 and had already done their “homework” in financial management managed to make it through the year. Those who hadn’t put the necessary measures in place suffered a lot, are still suffering, or even had to shut their doors.
Possible Economic Scenarios for 2021
As previously discussed in our articles, we need to prepare for at least four scenarios for quality financial management. They are:
V Scenario: A rapid economic recovery, with a sharp decline at first but a quick business rebound.
U Scenario: We might need to prepare for a U-shaped recovery, where the recovery will be slower, taking time for businesses to return to some level of normalcy.
W Scenario: A more pessimistic and conservative outlook, the W scenario is marked by fluctuations. With the vaccine beginning to be administered and bringing new hope to the market, a second wave of the coronavirus could emerge, along with uncertainty about the vaccine’s management.
I Scenario: The most pessimistic projection, where the economy declines and doesn’t recover. As bad as this may seem, it should also be considered when preparing financial management strategies.
How to Prepare for These Different Scenarios?
It is possible that working with budgeting and financial management has never been as essential as it is now. It’s no longer enough to be prepared for just one scenario, but rather for multiple ones, with strategies in place for each.
If the outlook is for the economy to recover in 2021 and for the year to be excellent, what investment strategy will be used? And what about hiring? Marketing? All these questions unfold into numerous scenarios.
The key is to work with the “what if” approach, to consider possibilities. What if it doesn’t work out? What if it doesn’t happen? Therefore, having a strategic plan with clear actions for these scenarios is crucial. This way, I’ll have a proactive management style, rather than a reactive one that only kicks in later. You will already be prepared in advance for any scenario that may arise.
>> Also access: EBITDAC: How the world could be different post-pandemic.
The End of Emergency Aid
Unfortunately, there are no indications that the government will repeat the emergency aid, which raises concerns from a fiscal perspective. But what are the possible scenarios? The government’s aid can be divided into two areas.
The first is the one that stands on its own and does not depend on it, such as agribusiness. The outlook for this sector remains very positive, with strong performance. Since it is independent, it should continue to do well.
The construction sector benefits from the low interest rates, and since it doesn’t make sense to leave money idle, people have been investing more in construction. This, in turn, stimulates the entire supply chain.
The second area is the sectors that could be significantly impacted because they are directly tied to emergency aid. This includes the consumer goods, industrial, and food sectors, especially those serving the C and D social classes.
Financial Management is with Value
Did you understand the importance of good financial management and how it can be decisive in the success or failure of your business? With Value, you’ll be prepared to face any adversity in 2021, thanks to our projections of multiple scenarios.
