Summary: Budgeting is in high gear across the economy, yet forecasting revenue is a challenge for all businesses after a roller-coaster, highly volatile 2020.  The economy looks to be improving.  There are five key reasons to be optimistic for 2021: COVID-19 vaccines, rising consumer sentiment, optimistic business outlooks, rising manufacturing indices, and a reduce likelihood of a contested election.  Budget conservatively, but plan to be agile for upside in 2021.

2020 has been a year like no other.  We started out 2020 with a global COVID-19 pandemic which shutdown the global economy, civil unrest, an early resurgence of COVID-19 in the United States starting July, and a contentious American election.   This caused CEO’s, CFO’s and executive teams to rapidly cut spend, layoff workers, push cashflow 

When CFO’s were polled in the early summer after the initial phase of the pandemic, CFO’s were starting to spend smartly again.  Sales and revenue were going to take a hit versus expectations.  Purse strings and budgets were held tight, but budget was created for employee safety, work from home, and the digital transformation of sales, marketing, finance and operations.  CFO’s are not interested in mutli-year transformations, but are looking for small projects, quick implementations, and quick ROI.  According to PWC, in June 2020, the biggest concerns were a resurgence of COVID, a global economic downturn, and the financial impacts for the enterprise. 

2021 Predictions Procurement

https://www.pwc.com/us/en/library/covid-19/pwc-covid-19-cfo-pulse-survey.html

In October 2020, the eighth month of the global pandemic and shutdown, the pandemic is still raging.  COVID continues to be active in the United States of America, India and Latin America.  Europe is starting to the see a second wave of infections.  The death toll has exceeded 1 million people and more than 38 million people have been infected, including the President of the USA and a large percentage of the American White House.   The US election continues to be very contentious with the potential of a contested election, due to controversy over mail-in ballots and a conservative Supreme Court.  

But there are many reasons to be optimistic as we enter strategic planning and budgeting for 2021.  

  1. A COVID-19 treatment and vaccine approval are on the horizon:  According to the NYTimes (https://www.nytimes.com/2020/10/07/podcasts/the-daily/future-of-the-coronavirus.html?showTranscript=1), there are 8 potential COVID-19 vaccines in clinical trials and the first vaccines can receive FDA approval by early 2021 in the best case and mid-2021 in the base case.  Yes, Johnson and Johnson and Eli Lilly have had to pause their clinical trials, but they are likely to resume in the near future.  As Health Reporter Donald McNeil of the NYTimes states, “And if only three out of the eight we have in the works work, we will eventually have enough doses for all Americans.”  It is a miracle of science that we are able to develop and approve a vaccine for COVID-19 in 12-18 months when the average vaccine takes 4 years or 48 months to develop.  COVID-19 treatments are also approaching approval.  Monoclonal antibodies to treat COVID-19 should be approved before the end of 2020.  https://investor.regeneron.com/news-releases/news-release-details/regenerons-regn-cov2-antibody-cocktail-reduced-viral-levels-and President Trump received the Regeneron antibody cocktail REGN-COV2 which hastened his recovery.  Monoclonal antibody treatment combined with better knowledge and treatment of COVID-19 will lead to lower death rates for those infected.  
  1. Global Consumer Sentiment is on the rise:  According to the September 2020 McKinsey Survey on Consumer Sentiment, global consumer in on the rise.  A majority of respondents are saying that global economic conditions will be improving over the next six months.  We are already seeing positive economic growth in China.  
20201 procurement predictions

https://www.mckinsey.com/business-functions/strategy-and-corporate-finance/our-insights/the-coronavirus-effect-on-global-economic-sentiment

  1. Global Business Sentiment is Rising as well:  In lock-step with consumer sentiment, business executives are seeing their businesses and profit outlooks improving.  2020 results will be below initial forecasts, but 2021 is looking promising especially as the world is adapting to work from home.  COVID-19 impact has been regional and sector by sector.  Companies in retail, travel and hospitality, small and medium sized businesses, and local, foot-traffic dependent businesses like movie theaters have been impacted far worse than others.
  1. Manufacturing activity and backlog signals optimism: According to the Institute for Supply Management, the manufacturing industry continues to grow based on the most recent September data.  Key indicators are significantly up from April and grew from August to September.  The Backlog of Orders Index was 0.6% higher and the Employment Index increased 3.2% from August.  

https://www.ismworld.org/globalassets/pub/research-and-surveys/rob/pmi/rob202009pmi.pdf

  1. Likelihood of a contested election is declining:  According to the stock market analysts, the odds of a contested election are declining after the first Presidential debate and President Trump’s contracting COVID-19 in early October.  https://www.cnbc.com/2020/10/06/stock-markets-downplaying-chance-of-a-contested-election-invesco.html  The contested election and potential civil unrest are two factors that have had CFO’s taking a cautious stance on spend and the economy.   The VIX index which is a measure of volatility has decline since peaking in early September.

https://www.cboe.com/products/futures/vx-cboe-volatility-index-vix-futures