Explain the challenges of the budgetary system that the implementation used by a company during the Covid-19 pandemic and give some recommendation

Budgetary System Challenges:

Budgets involve forecasting in future.There are past trends on which assumptions are applied and future shape and volume predicted.All these are based under assumption of a "normal enviornment".

The current year 2020 has tirned out to be "abnormal year", an exceptional year wherein the whole dynamics has changed.This caused by the Global pandemic COVID19.Nobody had any clues while preparing the budgets for 2020 in 2019 that the world will come to standstill.Hence whatever the corporates had forecasted/planned for 2020 has been undone.

The second challenge is carrying out the excercise in current year for next year (remember Budgets are a continuous annual activity undertaken by businesses).In the current state nobody can predict when would things normalise.The absence of a cure has further added onto the complexity.Though the race is on among couontries to find a cure but nothing is known.The world is learning day by day.

With above as background and all movements / activities at hault making forecast has become next to impossible.Production,trading all have stopped.

Budgets are based on assumptions as mentioned earlier and trends but in 2020 but are abnormal and when would situation normalise is also uncertain , hence budgeting poses challenge.

Recommendations:

A disruptive approach as compared to the steady-as-she-goes mentality has to be adopted.Following could be few

• The executive team needs to be able to look at the larger picture from a forecasting perspective. When mapping out the way forward from the COVID-19 crisis, for example, this means staying up-to-date with information on how the economy is reacting to the changes that unfold.
• Be aware of emerging technologies and social issues, so that longer-term objectives are met, rather than just the annual profit target.
• Allocate resources through the budget process to areas of the organisation that are most likely to face challenges, or where there are opportunities to mitigate the impact of extreme events.
• Leadership has to be bold
• Turn budgeting into a forward-looking process, where managers adapt to uncertainty when it arises, and not game around it before a period starts by arguing for easy numbers so they get a larger bonus later