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Page 1: Crisis Impact Prediction and Simulation€¦ · Introduction – Reto Brunner 2. Key topics – what our experts are saying . a. Scenarios & prediction – Gori von Hirschhausen

COVID-19

Crisis Impact Prediction and Simulation

May 2020

Page 2: Crisis Impact Prediction and Simulation€¦ · Introduction – Reto Brunner 2. Key topics – what our experts are saying . a. Scenarios & prediction – Gori von Hirschhausen

PwC

1. Introduction – Reto Brunner

2. Key topics – what our experts are sayinga. Scenarios & prediction – Gori von Hirschhausen / Roland Wernerb. Initial situation and objective – Philipp Appenzellerc. Our solution – Frauke Schleer-van Gellecom / Philipp Appenzellerd. How to get started – Maurice-Oliver Nipper

3. Q&A

2

Topics we will cover today

Covid-19 | Crisis Impact Prediction and Simulation

Page 3: Crisis Impact Prediction and Simulation€¦ · Introduction – Reto Brunner 2. Key topics – what our experts are saying . a. Scenarios & prediction – Gori von Hirschhausen

Initial situation & objective

1

Page 4: Crisis Impact Prediction and Simulation€¦ · Introduction – Reto Brunner 2. Key topics – what our experts are saying . a. Scenarios & prediction – Gori von Hirschhausen

PwC

Covid-19 considerably increases the uncertainty about future business development of companies

Covid-19 | Crisis Impact Prediction and Simulation4

How long are the effects expected to last?

Which Markets are particularly affected?

What influence dopolitical decisions have?

How effective are corporate countermeasures?

Expected / planned business development before Covid-19 Possible business development due to Covid-19

How and to what extent is my business model affected?

Page 5: Crisis Impact Prediction and Simulation€¦ · Introduction – Reto Brunner 2. Key topics – what our experts are saying . a. Scenarios & prediction – Gori von Hirschhausen

PwC

Scenario 1 EBIT effect Scenario 2 EBIT effect

Expected effects on business development

Lockdown extension DE

Sales slump 17% Europe

Factory closure Spain

Relaunch Asia

Corporate countermeasures

Investment delay 1 year

Introduction of short-time work

Tax deferral

Simulated outcome

50

29

41

50

22

34

Impact Prediction & Simulation enables the definition and evaluation of scenarios for business development

Covid-19 | Crisis Impact Prediction and Simulation5

-32%-18%

Objective Covid-19 Impact Prediction & Simulation:• Flexible combination of possible risks

and countermeasures• Automated and fast evaluation of

various factors along controlling KPIs (esp. operating result / liquidity)

• Comparability of possible scenarios• Continuous updating of scenarios and

corresponding effects in cooperation with the organization

Page 6: Crisis Impact Prediction and Simulation€¦ · Introduction – Reto Brunner 2. Key topics – what our experts are saying . a. Scenarios & prediction – Gori von Hirschhausen

Our solution

2

Page 7: Crisis Impact Prediction and Simulation€¦ · Introduction – Reto Brunner 2. Key topics – what our experts are saying . a. Scenarios & prediction – Gori von Hirschhausen

PwC

Corporate Planning

Projection actual figures

Impact Prediction & Simulation offers a platform for scenario evaluation based on various methodological approaches

P&L

BS & NWC

Liquidity

Long-Term Industry Forecasts

Short-Term Forecasts

Overall workflow

Baseline

Management Simulation

2019 2020 2021

2019 2020 2021

2019 2020 2021

2020 2021

Revenue

Baseline 170 205

Decline in sales -30 -20

Restart EU +5 0

Single costs

Baseline 95 105

Decline in sales -10 -6

Restart EU +2 0

Gross profit

Baseline 75 100

Scenario 58 86

VUL

Trend

Baseline

BaselineActual Plan

Actual Projection

-30 -20

+5 0

-10 -6

+2 0

ReportingPrediction IndividualEvaluation

P&L

BS & NWC

Liquidity

Covid-19 | Crisis Impact Prediction and Simulation7

Page 8: Crisis Impact Prediction and Simulation€¦ · Introduction – Reto Brunner 2. Key topics – what our experts are saying . a. Scenarios & prediction – Gori von Hirschhausen

PwC

Predictive Analytics can help to improve your decision-making

Covid-19 | Crisis Impact Prediction and Simulation8

What Predictive Analytics is

• When done right: an optimal objective projection of the future based on all available data

• fast and automated computer-based predictions• Analysis of relevant business drivers and their use to

learn about possible future scenarios

What Predictive Analytics is NOT

• universal intelligence to replace humans

• a crystal ball predicting all future shocks• a one-size-fits-all solution for all my

data problems

Forecasting

Classification

Predictive Analytics

Regression

…TextAnalysis

Machine Learning

Predictive analytics analyse current and historical facts to make predictions about the future.

Excursus

Page 9: Crisis Impact Prediction and Simulation€¦ · Introduction – Reto Brunner 2. Key topics – what our experts are saying . a. Scenarios & prediction – Gori von Hirschhausen

PwC

Properties of leading indicatorsProcyclicality and lead

Covid-19 | Crisis Impact Prediction and Simulation9

Early warning systems use procyclical processes in combination with a lead

Leading indicator Lagging indicator

0 20 40Period

Zielindikator

0 20 40Period

ZielindikatorNachlaufender Indikator

Procyclical process Countercyclical process

Excursus

Leading indicator

Target indicator

0 20 40Period

Zielindikator FrühindikatorLeading indicatorTarget indicator

Target indicator

Target indicator

0 20 40Period

ZielindikatorTarget indicator Leading indicator

Lagging indicator

Page 10: Crisis Impact Prediction and Simulation€¦ · Introduction – Reto Brunner 2. Key topics – what our experts are saying . a. Scenarios & prediction – Gori von Hirschhausen

PwC

An example of procyclicality and lead…

Industrial production and ifo business climate index

Covid-19 | Crisis Impact Prediction and Simulation10

Period shift 0 1 2 3 4 5 6

Correlation between target and leading indicator 0,721* 0,792* 0,834* 0,852* 0,848* 0,826* 0,778*

A lead of three periods of the leading indicator has the highest positive correlation → procyclical and leading*Significant to the 1% level, Period 2007M01 - 2015M02

-30-20-100102030

-30%

-10%

10%

30%

2007M04 2008M04 2009M04 2010M04 2011M04 2012M04 2013M04 2014M04 2015M04 Cha

nge

in th

e ifo

inde

x co

mpa

red

to th

e pr

evio

us y

ear

Annu

al g

row

th ra

te o

f in

dust

rial p

rodu

ctio

n

Industrieproduktion Deutschland

PwC

Excursus

Industrial production Germany ifo - business climate index

Page 11: Crisis Impact Prediction and Simulation€¦ · Introduction – Reto Brunner 2. Key topics – what our experts are saying . a. Scenarios & prediction – Gori von Hirschhausen

PwC

-30-20-100102030

-30%

-10%

10%

30%

2007M04 2008M04 2009M04 2010M04 2011M04 2012M04 2013M04 2014M04 2015M04 Cha

nge

in th

e ifo

inde

x co

mpa

red

to th

e pr

evio

us y

ear

Annu

al g

row

th ra

te o

f in

dust

rial p

rodu

ctio

n

Industrieproduktion DeutschlandIndustrial production Germany ifo - business climate index

An example of lead and publication lead…

Industrial production and ifo business climate index

Covid-19 | Crisis Impact Prediction and Simulation11PwC

Lead

:~3

mon

ths

Lead + publication lead =~5 months-30

-20-1001020

-30%-20%-10%

0%10%20%

2008M04 2009M01 2009M10-8

2

-6%2014M10 2015M01 2015M04

Publ

icat

ion

lead

: ~2

mon

ths

Excursus

Page 12: Crisis Impact Prediction and Simulation€¦ · Introduction – Reto Brunner 2. Key topics – what our experts are saying . a. Scenarios & prediction – Gori von Hirschhausen

PwCCovid-19 | Crisis Impact Prediction and Simulation

12

1 Growth above long-term trendDecrease compared to previous month

2 Growth above long-term trendIncrease compared to previous month

3 Growth below long-term trendIncrease compared to previous month

4 Growth below long-term trendDecrease compared to previous month

Excursus

1. 2.

3.4.

Above trend

Below trend

Increase

Decrease

Page 13: Crisis Impact Prediction and Simulation€¦ · Introduction – Reto Brunner 2. Key topics – what our experts are saying . a. Scenarios & prediction – Gori von Hirschhausen

PwC

Potential follow-ups

− Pre-COVID-19 budget− Adjusted planning parameters from

operations− Current scenarios derived

What`s next? How to get started

13

YOUR CURRENT FORECASTING

PWC OUTSIDE-IN ASSESSMENT− Relevant scenario parameters

for COVID-19− Long-term macroeconomic

scenarios− Potential impact on business

development (market, industry, peer based) Outside-in view Workshop

(Management Team, 3-4 hrs)

✔ key risk areas ✔ need for further investigation✔ available measures✔ roadmap

Enhance scenario planning

Assess possible change of future business model

Adjust restructuring or ramp-up plan

Get challenged on the scenarios for your business and derive data- and fact-driven decision making on the optimal measures for your business

….

Covid-19 | Crisis Impact Prediction and Simulation

Page 14: Crisis Impact Prediction and Simulation€¦ · Introduction – Reto Brunner 2. Key topics – what our experts are saying . a. Scenarios & prediction – Gori von Hirschhausen

PwC 14

Ask us anything - Q&A

Instructions

In this Q&A, you as the audience can get involved, so please submit your questions for your Experts via the questions box on your left hand side

Covid-19 | Crisis Impact Prediction and Simulation

Page 15: Crisis Impact Prediction and Simulation€¦ · Introduction – Reto Brunner 2. Key topics – what our experts are saying . a. Scenarios & prediction – Gori von Hirschhausen

PwC

Thank you!

One Point of Contact:Via our crisis helpline and PwC Switzerland website (EN I DE I FR )

15Covid-19 | Crisis Impact Prediction and Simulation

Maurice-Oliver NipperFinance Transformation Lead PwC SwitzerlandE-mail

Your experts today:

Reto BrunnerBusiness Restructuring ServicesE-mail

Gori von HirschhausenFinance Transformation Lead PwC EuropeE-mail

Roland WernerPartner PwC GermanyE-mail

Frauke Schleer-van GellecomPredictive Analytics Specialist PwC GermanyE-mail

Philipp AppenzellerData Analytics Expert PwC GermanyE-mail

Page 16: Crisis Impact Prediction and Simulation€¦ · Introduction – Reto Brunner 2. Key topics – what our experts are saying . a. Scenarios & prediction – Gori von Hirschhausen

pwc.com

Thank you

© 2020 PwC. All rights reserved. Not for further distribution without the permission of PwC. “PwC” refers to the network of member firms of PricewaterhouseCoopers International Limited (PwCIL), or, as the context requires, individual member firms of the PwC network. Each member firm is a separate legal entity and does not act as agent of PwCIL or any other member firm. PwCIL does not provide any services to clients. PwCIL is not responsible or liable for the acts or omissions of any of its member firms nor can it control the exercise of their professional judgment or bind them in any way. No member firm is responsible or liable for the acts or omissions of any other member firm nor can it control the exercise of another member firm’s professional judgment or bind another member firm or PwCIL in any way.