Modernizing Forecasting Techniques towards Organizational Survival

“It is not the strongest of the species that survives, nor the most intelligent that survives. It
is the one that is most adaptable to change.” These are the words once uttered by Charles Darwin,
an English naturalist and biologist. These words do not only contribute to the science of evolution,
but also reflect an idea to ponder in the aspect of forecasting. Forecasting play an important role
in the planning process through enabling proper planning for future anticipations and therefore,
affects decisions and activities throughout an organization (Stevenson, 2015). It is a method
employed to revolutionize the operations of an organization such as the International Monetary
Fund (IMF) and the World Bank. These organizations share the same goal of raising living
standards in their member countries, with the IMF focusing on macroeconomic issues and the
World Bank concentrating on long-term economic development and poverty reduction.
Brent Eastwood, a political scientist, examined how the IMF and World Bank produces
forecasts. It uses a “bottom-up” approach. Economic teams create a separate and distinct
macroeconomic model for each country. Meanwhile, economists in Washington devise a macro
or global model with assumptions about interest rates, exchange rates, unemployment, and
inflation. Each country forecast is then aggregated, and “through a series of iterations,” statistical
analysis at the micro-level is integrated with the macro-level. The result is the forecast of the
IMF World Economic Outlook for economic growth that is often mentioned in the media.
It does not appear that the IMF is fully utilizing modern data science languages, tools,
frameworks, and integrated development environments such as R, R Studio, Python, NumPy,
Anaconda, SQL, Hadoop, Spark, or MongoDB. Thus, the World Bank uses straightforward and
traditional methods of modeling and forecasting. He discovered that both organizations appear to
still rely on Microsoft Excel and other traditional and dated software. Neither has completely
embraced modern data science techniques or machine intelligence algorithms for their predictions
and forecasts. The implications for the IMF’s and World Bank’s less evolved research and analysis
are speed and timeliness. IMF/World Bank research methods for forecasting are mostly behind the
times. Currently, the IMF’s World Economic Outlook and the World Bank’s Global Economic
Prospects are issued and updated only twice a year. If machine learning and artificial intelligence
were used, these forecasts could be updated quarterly, monthly, or even weekly. The second
implication is competition. Traditional methods of forecasting and prediction are undergoing rapid
change. Other professors and organizations are using alternative data like Google search statistics
to create real-time measures of inflation. Therefore, IMF and World Bank should keep up with
these trends. Today’s data scientists use languages such as R, SQL, and Python. These software
languages make it easier for economists to collaborate, which is important since the IMF alone has
1,200 economists. The IMF and World Bank could use these platforms to analyze social media
from various countries or to integrate satellite imagery for real-time economic development
analysis. Adopting these data science techniques can help with speed and timeliness. This would
enable the release of monthly reports instead of bi-annual forecasts.
In this constantly changing world, organizations around the globe must also utilize means
to persistently achieve its goals despite of the challenges in this modern era. Continued existence
in this contemporary time does not depend on the power and fame possessed by an organization,
but on its flexibility and adaptability to change just as how species adjust to their environment for
survival. This is most especially true for international organizations where there is a need to
advance its forecasting tools and techniques in order to improve its worldwide operations for the
attainment of their goals. Without these, just like an organism that cannot adapt to the changes in
their ecosystem, an organization may become threatened, endangered or extinct. Therefore,
updated and competitive forecasting tools must be integrated as part of the operations management
of organizations to respond to the growing demand for timely, reliable and accurate forecasts.