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ABFM MODULE - A
Chapter 2: PLANNING (PART-I)
What we will study?
*What is Planning?
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INTRODUCTION:
We are involved in various activities in our life, some of which
are routine activities but some are such that their results have
important bearing on us.
Such activities are often not carried out it a casual way but in
a carefully decided manner.
In other words, we may say that we have planned these
activities.
If an activity is well planned, the probability of achieving the
desired results increases.
In business organisations also, the important activities are
well planned to increase the likelihood of achieving the set
goals.
FUNDAMENTALS OF PLANNING:
Planning is the process of engaging in thoughtful discussion
before undertaking a task, which entails engaging in in-depth
contemplation about that task and going into all the details
meticulously to be ready with an execution and
implementation plan, to save both effort and time.
Planning involves doing an objective analysis of future
requirements, to facilitate the modification of ongoing
activities considering the objective that has been set.
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It involves research that is done deliberately and consciously
to formulate the design and the orderly series of actions,
through which it is anticipated to succeed in accomplishing
goals.
During the planning, each possibility, both present and future,
that is even remotely connected to the goals, will be taken
into consideration.
The planning process also incorporates consideration of every
conceivable risk, including losses, defections, and so on.
It engages deeply in various activities to give directions,
prescribe methods, evolve procedures, and transform
activities, to decide to accomplish the business goals in an
efficient and effective manner.
The process of planning is based not only on the finances,
time frame, infrastructure, and resources, but also since
decisions and particular or directional plans, which might be
strategical, tactical, or operational, are made based on those
considerations.

Planning covers

• What is to be done?

• Where it is to be done?

• How it is to be done?

• When it is to be done?

• Who will execute?

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STEPS IN PLANNING:
The process of planning consists of the following steps:
1. Opportunity Analysis:
Opportunity analysis entails analysing the opportunity, being
aware of the opportunity, and basing the development of the
business plans on this opportunity.
This exercise also involves comprehending the existing
circumstances of the available opportunity and having a
general understanding of its future prospects.
2. Objective Establishment:
Without knowing the objective, it is impossible to develop a
strategy for its accomplishment.
Objectives are, therefore, the initial step in the
planningprocess, which is typically a political endeavour.
3. Developing Planning Premises:
The collection of future forecasting-derived assumptions is
known as the planning premises determination.
The predicting must be based on a realistic assessment of the
environment in which the plans are to be executed, as well as
a creative understanding of the surroundings.
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The premises must be constantly monitored and upgraded.
The premises cover the following areas:
i. Forecasting
ii. Basic Policies
iii. Existing Plans.

4. Alternatives Identification:
The process of determining the availability of various means
to attain goals is referred to as “identifying alternative
means.”
It is essential to make a written record of the total number of
alternatives available, that should initially be narrowed down
to the most enticing and satisfying options, through a
preliminary examination, based on one’s trials, experiences,
and study.
5. Evaluating Alternatives:
Following the discovery of additional methods and an
examination of both their strong and weak points, the planner
should assess the alternative methods.
Because there is such a wide variety of options and a wide
range of possible outcomes, this task is not an easy one.
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When comparing the various approaches, the use of statistical
methods and computers proves to be extremely beneficial.
One of the processes might be less desirable or effective
compared to the others, while another might be more suited
to the immediate goal.
It’s possible that one of the processes would be very
profitable, but the other would be extremely expensive.
6. Selecting the Best Alternative:
At this stage, the plan is to be adopted, and the numerous
options are to be evaluated, so that it can be determined
which plan can best assist in the accomplishment of the
business objectives.
The stage is called “selecting the best alternative.”
At this juncture, the question that must be resolved is
whether the initial plan is superior or whether the alternate
strategy is going to be effective.
7. Formulating Derivative Plan:
The time required to formulate derivative plans, i.e., sub plans
or secondary plans, includes the time needed to implement
the plan in accordance with the decision, which would
comprise the procedures below:
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• Development of the new policies and procedures
• Coordination of the activities of the derivative plans
• Working in accordance with the targets of the main plan

8. Follow-up and Reviewing the Plan:

Planning is a continuous process for ensuring attainment of
business objectives.
It is very important for a business entity to continuously
monitor the implementation of the plans and keep adjusting
and amending the plans as required.
Planning is, in its most fundamental sense, the administration
of all the functions associated to the work on which you spend
your valuable time, engaging in in-depth deliberation.
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ABFM MODULE - A
Chapter 2: PLANNING (PART-II)
What we will study?
*What are the importance of planning?
*What are the advantage and disadvantage of planning?
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IMPORTANCE OF PLANNING:

Planning is one of the most important pillars of management

and helps an organisation to achieve its laid down objectives.
The following points highlight the importance of planning:
Helps Goal Creation:
Planning involves the process of the achieving actual goals
and so it makes business goal oriented.
The fact that everyone clearly knows about his/her goals,
helps the achievement of goals in an effective manner.
Thus, planning becomes the very basis of all other
management functions.
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Provides Direction:
The clear objective of the plan is to provide the directions
where efforts should be channeled in as efficient manner as
possible, to achieve the desired results.
The objectives of the organizations are defined in
unpretentious and clear terms while communicating the
established plan.
Tackles Uncertainty:
The planning process makes predictions with the help of
existing information.
If it anticipates some risk or the possibilities of the losses in
future, then it avoids the risk and creates another path to
attain the anticipated goals.
Discards overlapping and wasteful activities:
As already discussed, the purpose of the planning is to
execute the future tasks in as efficient manner as possible.
So, the questions - what, how, why, where, when are
addressed in advance and the chaos, which might occur at a
later stage, is taken care of.
Best decision-making planning always helps to prevent the
unwanted risk and overlapping and helps avoiding duplication
of efforts and wastage of resources.
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Promotes Innovative Ideas:
In today’s world, markets are becoming more and more
dynamic every day.
As such, out-of-the-box ideas are needed for managing the
operations of the enterprise, to beat the competition.
Decision Making Facilitation:
Planning is a vital part in the decision-making process.
It acts as a guide for efficient and valid decision making,
whenever a manager must take a decision.
With the help of planning, a manager can give a deep thought
to all processes and predict the future scope.
Controlling:
To facilitate the functions of coordination and control,
planning plays a vital role.
The extension of the planning process is considered as control,
due to the interdependence of the controlling on the plan and
vice-versa.
Without a concrete objective build upon a plan, a business will
not be able to investigate where it went wrong and will not be
able to take the right action and endorse its success.
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A SMART goal is a carefully planned, clear and track able
objective.
SMART is an acronym that stands for Specific, Measurable,
Achievable, Realistic, and Timely.

ADVANTAGES AND DISADVANTAGES OF PLANNING:

In today’s dynamic world, short-term planning may not be
enough for any organisation, aspiring for growth.
Arbitrary actions rarely result in progress.
An organisation which does not plan properly and
scientifically, would be vulnerable to the ever-changing
environment.
Effective planning, therefore, helps an organisation to face
such situations in an efficacious manner.
Advantages of Planning:
The main advantages of planning are as follows:
Coordination of Various Activities:
The coordination of efforts of various functionaries and
departments of a business entity to achieve the goals, set out
in the plan, is facilitated by planning.
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When actions are planned with specific results in mind and
centred on those plans, the level of success experienced by
such actions considerably increases.
Optimization of Resources:
Planning enables managers to determine which activities have
the maximum demand for resources, and further helps them
in the optimum allocation of these resources to the areas that
will provide the maximum possible return on investment.
Inspirations and Responsibilities:
People are unable to reach a consensus when they do not
have well-defined goals for themselves and do not have a
concept of what is commonly expected of them.
Planning lessens the likelihood of risk and outlines the
accomplishments that are commonly anticipated of everyone.
Individuals are compelled to work for a goal that they are
familiar with and can comprehend and relate to.
Establishment of Execution Principles:
The planning process is distinguished by milestone positions,
which are used to mark progress along the way to the
intended result.
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The milestones serve as a reference point for determining
whether things are moving as planned and, if not, when
adjustments are necessary.

Basic advantages of the planning process:

a) Planning reduces uncertainty.
b) Planning is focused on objectives.
c) Planning facilitates control.
d) Planning encourages creativity and innovation.
e) Planning anticipates problems and copes with change.
f) Planning limits vulnerabilities.
g) Planning works with co-appointment.
h) Planning works on worker’s moral.
i) Planning helps in accomplishing economies.
j) Planning works with controlling.
k) Planning gives the upper hand to the managers.
l) Planning empowers development.
Disadvantages of Planning:
There is not an iota of doubt that planning is beneficial to an
organisation but planning also has the potential to be
detrimental to an organisation if it is not carried out as
intended.
Some of disadvantages of planning are as under:
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Forestalls Activity:
It is possible that managers will become so immersed in the
process of planning and getting ready for every possibility,
that they won’t have time to put their plans into action.
It is sometimes referred to as “death by plan.”
Lack of Concern:
If an Organisation has solid systems in place, its managers
may be led to believe that they are aware of the path the
Organisation will take and how it will accomplish its objectives.
Because of this, it is possible that they won’t be able to
monitor the system’s progress or recognise shifts in the
external circumstances.
Planning is not a one-and-done kind of process, as was
established earlier in our discussions.
Plans ought to be subject to continuous modification, as they
are carried out in the real world.
Forestalls Adaptability:
Even though well-laid plans have the potential to encourage
adaptability, sometimes the opposite occurs.
Middle and lower-level supervisors may have the mentality
that they are required to stick to an arrangement no matter
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what, even if their experience demonstrates that the
arrangement is not working.
They will continue to devote their time and resources to
activities that are not adequate rather than bringing issues to
the attention of higher heads so that changes can be made.
Hinders Innovativeness:
People working for the organisation may get the impression
that they are required to carry out the activities outlined in
the plans because only that is expected of them and, how well
they complete the systematic tasks assigned to them is what
matters.
They might be prevented from engaging in invention, drive,
and learning via trial and error.
Achieving goals requires not just careful planning but also
consistent progress, and the planning process in any
organisation, if not executed well, might stifle creative
thoughts.
Basic Disadvantages of the planning process:
a) The process of planning takes a significant amount of time.
b) The planning process may result in lack of trustworthy data.
c) The process of planning could end up being very expensive.
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d) The act of planning results in rigidity.
e) Planning is an exercise in fighting against change as the
environment in which an organisation operates is ever-
changing and dynamic.
f) Planning could give a false impression of the organisation’s
strength.
g) The plan may be adapted to fit the interests of individual
participants rather than the goals of the overall endeavour.
h) Inter-departmental rivalries may impact the effectiveness
of planning.
i) Human errors can result in bad planning.
j) Problems associated with under or over fixation of targets
could always crop up.
k) An erroneous impression, that everything is well, might be
created giving a false sense of security to the management.
l) A rapidly changing environment may make planning harder.
m) A manager’s daily work schedule may be affected by his
involvement in planning process.
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ABFM MODULE - A
Chapter 2: PLANNING (PART-III)
What we will study?
*What is Management by Objective (MBO)?
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MANAGEMENT BY OBJECTIVES:
The phrase “management by objective” (MOB) was coined by
Peter F. Ducker and first appeared in his book “The Practice of
Management,” which was published in 1954.
Management by Objectives is the term given to the process
that is used for goal planning and the establishment of clear
parameters for those goals (MBO).
The MBO technique, in its most fundamental form, refers to a
procedure that involves the management and the employees
working together to jointly establish, record, and then
monitor the goals for a particular period of time.
Although it is a theoretical framework for management, it has
recently been fashionable due to the necessity for
management consultants to base their work on the need to
manage a business and the goals of that business.
The goals of MBO are adapted to match the requirements of
today’s organisations, which are expanding their work spaces
to accommodate their expanding workforces.
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Establish goals and desired outcomes for each
subordinate in a conference between the management
and the concerned subordinate.

Set performance standards.

MBO Assess performance achieved against goals set for the

process: employee through frequent performance review
meetings between the manager and the subordinate.

Identify reasons for shortfall and give feed-back for

improvement.

Establish new goals and new strategies for the coming

year.

Key Concepts of Management by Objectives:

Planning is the central idea behind the ‘Management by
Objectives’ and it implies that an Organisation and the people,
who make up that Organisation, aren’t just responding to
incidents and issues; rather, they are being pro-active and are
taking preventative measures.
Employees are allowed to define measurable personal goals in
accordance with the corporate goal, to fulfil the criteria of
‘Management by Objectives’.
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Example:
The Housing Division of an Infrastructure Company might
assign the Civil Engineering Sub-Division, headed by a Chief
Engineer, with the target of completing the infrastructure of a
housing project within the next twelve months.
The individual goals in this case must align with the
organizational goal of accomplishing the subdivision’s targets
and need to be coordinated to work with the overall
organizational goals which are managed and supervised by
the process called Management by Objectives.
An individual personal goal is a piece of a puzzle that needs to
be fitted with the other pieces of the puzzle to make it a
complete puzzle, which is the organisational goal.
Managers need to sit down to write down their goals
periodically and should continue to monitor the goals closely
to track progress.
This is also important because, in modern-day organisations,
achievement of goals is normally linked with performance
incentives and rewards.
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Management by Objective in Practice:
The five steps that make up the management by objectives
technique are as follows:
i. The first thing to do is either establish or alter the
organisational goals for the whole company.
The company’s mission and vision should serve as the basis
for developing this comprehensive overview.
ii. The second step is to communicate to employees the goals
and priorities of the organisation.
In 1981, George T. Doran used the acronym SMART to express
the concept.
This acronym stands for “specific, measurable, acceptable,
realistic, and time bound”.
iii. The third step is to encourage participation from the staff
members in the process of setting individual goals.
After sharing the goals of the organisation with the employees
from the top down, the employees should be encouraged to
help them set their own goals to achieve the larger
organization’s goals.
This will help ensure that the goals of the organisation are
met.
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Because of this, the employees have greater empowerment,
which increases their level of motivation.
iv. The monitoring of the progress made by the staff members
is the focus of the fourth step.
We have to determine how well we have met the managers’
and employees’ needs by measuring the performance of both
groups; which is one of the most important parts and a key
component of management by objective.
V. The fifth step is to evaluate and then reward the progress
that employees have made.
This step is based on the honest feedback given by each
worker regarding what was accomplished and what was not
accomplished.
Limitations of Management by Objectives:
a) The management by objectives approach frequently
disregards the culture of the organisation as it exists today as
well as its working conditions.
b) Goals and targets receive a greater amount of attention.
When managers forget about participation, employees’
willingness to contribute, and the value of MBOs for
management’s professional growth, they put constant
pressure on workers to achieve their objectives.
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c) As a potential driver of success, managers will frequently
place a greater emphasis on goal setting than they will on
issues pertaining to operations.
d) The MBO approach does not place a strong emphasis on
the significance of the environment in which objectives are
formulated.
The context encompasses everything from the availability of
resources and their efficiency to the buy-in associated with
the leadership and the stakeholders.
e) As a final point to consider, many managers have the habit
of viewing management by objectives as a comprehensive
system that, once implemented, can address any and all
management concerns.
Overdependence can bring problems into the MBO system
that the system is not prepared to deal with, and it
discourages any potential positive impact that could be made
on the issues that the system is supposed to deal with.
Advantages of MBO:
a) It provides a means for determining one’s goals and
planning to achieve those goals.
If you don’t have a clear idea of what you want to accomplish,
you won’t ever be able to get there.
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b) Planning enables one to behave in a proactive manner and
to approach the accomplishment of goals in a disciplined
manner.
c) It also gives you the ability to plan for unforeseen
circumstances and limitations that could make planning more
difficult.
The reason why goals are measurable is that they can be
evaluated and modified in an easy manner.
d) The process of MBOs also enables the preparation of
contingency plans and strategies for overcoming roadblocks,
which may be obstacles to the plan.
e) Objectives should be measurable so that progress can be
monitored and altered as necessary.
If goals are effectively set, managed, and accomplished,
organisations have the potential to improve their overall
efficiency, thereby conserving resources and boosting
employee morale.
f) A more effective use of the available resources
g) An emphasis on the most important aspects of the results.
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Disadvantages of MBO:
a) The process of setting goals can be time-consuming, which
means that both the managers and the employees have less
time to get their actual work done.
b) The MBO programme requires elaborate written goals,
careful communication of goals, and detailed performance
appraisals, all of which contribute to an increase in the
amount of paperwork an organisation generates.
c) To achieve success, it is necessary for all of the employees
to work together.
d) Goals can become out of date and put a damper on
employees’ ability to take initiative and be creative.
e) Too much multi-tasking can result in inefficiencies.
f) The inability of the subordinate to feel at ease.
g) Inflexibility.
h) It might make the workers’ lives more difficult and
frustrating.
i) MBO is an approach based on rewards and sanctions.
j) MBO, sometimes, might lack appreciation by the employees
and workers.
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ABFM MODULE - A
Chapter 2: PLANNING (PART-IV)
What we will study?
*What are the plan components?
*What is environmental Analysis?
*What is PESTLE analysis?
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PLAN COMPONENTS:
For an organisation to achieve the goals, Planning is essential.
The key components of Planning include:
i. Objectives/ Goals.
ii. Policies/ Overviews.
iii. Procedures/ Directions/ Rules.
iv. Programs/ Methods.
v. Budgets/Funding.
vi. Time Schedule.
vii. Core values/ Mission/ Vision.
viii. SWOT Analysis.
ix. Management.
Environmental Analysis:
“Environmental Analysis” refers to the process of examining
all of the factors, both internal and external, that have an
impact on the performance of the organisation.
This can be done both systematically and qualitatively.
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The opportunity and the threats, that are external to the
organisation, are portrayed by the external components,
whereas the strength and the vulnerability of the business
entity are shown by the internal components.
The information gathered from conducting an environmental
analysis is what strategic planners use when trying to make
predictions about future trends.
The information can also be utilised to conduct an operational
environment analysis and to establish organisational goals.
The results of environmental analysis can be used to evaluate
the state of the Organisation at the present time as well as to
make projections about the future.
Advantages of the Environmental Analysis:
a) Contributes to the accomplishment of goals.
b) Identifies and analyses potential dangers.
c) Helps understand the developments in the commercial
environment.
d) Creates awareness of impending dangers of every
prospective opportunity.
e) Makes predictions about the future.
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f) Helps recognition of potential dangers and potential
benefits.

Environmental Analysis Steps:

i. Identifying.
ii. Scanning.
iii. Analysing.
iv. Forecasting.
PESTLE Analysis:
It is an indispensable resource for the development of
business strategies and plans.
It is a method for evaluating the business environment and
the potential impact that it could have on the performance of
the organization.
The acronym PESTLE refers to the following six internal factors
that can have an impact on your company:
a) Political. (P)
b) Economic. (E)
c) Social. (S)
d) Technological. (T)
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e) Legal. (L)
f) Environmental. (E)

These factors have a significant and profound impact on

business, and may also have varied implications on the
business over a brief or an extended period of time.
These factors may also impact changes, both positive and
negative, as well as any others and might also result in
positive or negative changes in credit ratings.

PESTEL analysis involves three steps:

1. Identify the relevance of each of the PESTEL factors to the
firm.
2. Identify and categorize the information for each factor.
3. Analyze the data and draw conclusions.
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Advantages of PESTLE analysis:
a) Cost effectiveness.
b) Easy framework.
c) Deep understanding.
d) Development alertness.
e) Opportunities exploitation.
Political Factors:
Political factors reflect such elements as the stability in the
political environment.
This is especially critical for companies entering new markets.
The banking sector looks all powerful — but it’s susceptible to
a bigger giant i.e., the government.
Government laws affect the state of the banking sector.
The government can intervene in the matters of banking
whenever they want to, leaving the industry susceptible to
political influence.
This includes corruption amongst political parties, or specific
legislative laws such as labour laws, trade restrictions, tariffs,
and political stability.
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Economic Factors:
Economic factors have a direct impact on the potential
attractiveness of various strategies.
For example, if interest rates rise, then funds needed for
capital expansion become costlier or unavailable.
Macroeconomic factors will have short and long-term effects
on the success of their strategies.
Economic factors include inflation rates, interest rates, tariffs,
growth rates of the local and foreign economies, exchange
rates, unemployment, and availability of critical labour.
The banking industry and the economy are closely tied.
Socio-cultural Factors:
The socio-cultural factors vary from country to country.
These may include local languages, dominant religions, leisure
time, age, lifespan demographics, attitudes toward
consumerism, environmentalism, and the roles of men and
women.
Cultural influences, such as buying behaviours and necessities,
affect how people see and use banking options.
People turn to banks for advice and assistance for loans
related to business, home, and education.
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Consumers seek information from bank staff regarding saving
accounts, bank related credit cards, investments, and more.
Consumers desire a seamless banking experience.
And technology is developing to allow consumers to buy
products easier, without requiring assistance directly from
banks.
Technological Factors:
Technological forces play a key role.
The Internet is changing the very nature of opportunities and
threats by altering the life cycles of products, increasing the
speed of distribution, creating new products and services,
erasing reach of traditional geographic markets.
Technology may lower production costs and/or improve
quality; create product and service innovations; reduce
communication costs and increase remote working; and alter
distribution.
In short, these factors may change the face of the business
landscape.
Environmental Factors: Environmental factors now go beyond
access to raw materials.
Today these factors may include the firm’s footprint on its
respective environments.
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With the use of technology — particularly with mobile
banking apps — the use for paper is being reduced.
Additionally, the need to drive directly to a branch to handle
affairs is minimized as well.
Many issues are taken care of through mobile apps and online
banking services.
Consumers can apply for credit cards online, buy gift cheques
and gift cards online, and have many of their banking
questions answered online or on phone by chatbots.
All these measures help in reducing individual environmental
footprints.
Legal Factors:
Legal factors reflect the laws and regulations relevant to the
region and the organization.
These factors include whether or not the rule of law is well-
established, how they change, and the costs of regulatory
compliance.
The banking industry follows strict laws regarding privacy,
consumers and trade.
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ABFM MODULE - A
Chapter 2: PLANNING (PART-V)
What we will study?
*What is internal environment analysis?
*What are the tools available for internal environment
analysis?
*What is SWOT analysis?
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Internal Environment Analysis:
The internal environment of a company can be classified into
the following broad categories, based on its resources and
assets:
a) Physical resources like plant and machinery, technology, etc.
b) Financial resources.
c) Distribution network.
d) Possession of strategic assets, such as access to raw
material, locational advantage, regulatory protection, etc.;
e) Network/contacts with outside organizations (suppliers,
customers, government, distributors, etc.);
f) Intangibles, like brand equity, goodwill, reputation, etc.;
g) Human resources-profile, skill, managerial competencies;
and organizational structure and administrative system,
culture and values, and employee motivation/relationship.
In the case of a bank, this would be in the form of its branch
and IT infrastructure, availability of capital, strategic
advantages like strength in a particular geographical region,
its brand equity and goodwill and, of course, the quality and
quantity of its human resources.
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An internal environment analysis is a tool that allows for a
comprehensive review of all aspects of a company’s
operations, internal guidance, and mission.
This review is done in order to identify opportunities and
threats.
This internal analysis, which is initiated by the management of
the company, is an attempt to identify the areas of risk and
opportunity in the business.
An organization’s capabilities, resources, and competitive
advantages are examined in depth as part of an internal
analysis, which reveals both the organization’s strengths and
its weaknesses in these areas.
After the project is finished, the organisation should have a
crystal clear idea of the areas in which it excels, the areas in
which it is doing well, as well as the areas in which it currently
lacks and has gaps.
The analysis equips management with the knowledge
necessary to make the most of the opportunities, strengths,
and expertise offered by the organisation.
This enables the management to develop strategies that
mitigate threats and compensate for vulnerabilities and
drawbacks that have been identified.
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You will be convinced that you are making effective and
efficient use of your resources, time, human capital, and focus
if the business strategy is based on the actual findings rather
than on your imagination or assumptions.
There are many tools available to assist in making the decision
about which framework to use, and each tool has the
potential to have its own value, as well as being the tool that
is most effective for a particular purpose.
Internal Analysis tools:

GAP Analysis:
The Gap Analysis is a tool for conducting assessments that
gives organisations the ability to analyse and identify internal
weaknesses as well as performance deficiencies.
It is easier to come up with a series of steps to bridge the gaps
between the various scenarios when you have a tool that
helps you distinguish and comprehend the differences
between them.
It is very easy to understand and put into practice, and it is
helpful to compare the current position of the organisation to
its projected position in the future.
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Strategy Evaluation:
The process of analysing the outcomes brought about by the
execution of a strategic plan is referred to as strategy
evaluation.
In the process of carrying out the evaluation, it is very useful
and helpful to check that everybody understands the business
strategy and works well with it.
SWOT Analysis:
SWOT stand for
o Strengths
o Weaknesses
o Opportunities
o Threats
The SWOT analysis is a useful model for conducting
evaluations because it takes into account both internal and
external factors simultaneously.
It is especially helpful to conduct a SWOT analysis to obtain a
comprehensive overview of a company, its products, its brand,
or a new project at any stage in the project life cycle.
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The SWOT diagram not only helps you think about all the
potential processes, opportunities, and threats that may have
an effect on the performance of your Organisation, but it also
gives you access to think about your organization’s eternal
strengths and weaknesses.
Strengths:
Give yourself some time to reflect on what you did well, what
tasks that were within your comfort zone that was good, and
any instance in which you exceeded expectations or achieved
great outputs.
This will help you recognise your strengths.
Your strong points are your excellent areas; in other words,
you do something noticeably better than everyone else, and
as a result, people praise you for it.
Weaknesses:
The next step is to determine the areas in which you need to
improve.
To do this, think about the things that are challenging for you
to acquire; for example, when you must work hard to achieve
something that you want but you don’t feel confident about it.
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Take a moment to reflect on your organization’s advantages
and give some serious thought to the opposite of the
questions on the SWOT template.

Opportunities:
The term “opportunity” refers to any factor that has the
potential to confer competitive advantages to the
Organisation.
Your capabilities have the potential to improve the situation,
which increases the likelihood that a favourable outcome will
result from the situation.
You need to focus your attention on the more advantageous
opportunities that are available to you right away and give
them careful consideration.
These do not have to be game-changing in any way.
The competitiveness of your company can be improved by
even relatively minor benefits.
Threats:
In terms of threats that are looming large over an
Organisation, one factor to consider is the potential for harm
that could be caused to the Organisation.
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Threats can be thought of as either processes or activities that
have the potential to have a negative effect on an
Organisation.
You will need to overcome these obstacles to achieve your
targets.
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ABFM MODULE - A
Chapter 2: PLANNING (PART-VI)
What we will study?
*What is Contingency Planning?
*What is Forecasting?
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CONTINGENCY PLANNING:
Contingency plans can be defined as alternative plans that can
be put into effect if certain key events do not occur as
expected.
Regardless of a firm’s strategies being formulated,
implemented and evaluated, unforeseen events could make
the strategy unsuitable.
The contingency plan minimises the risk associated with such
unforeseen unpredictable events.
The contingency plans are referred to as “Plan B” because
they always work as an alternative course of action if things
do not go as planned.
A contingency plan is also defined as an action of designing to
assist the company in responding to an event that may or may
not occur.
The term “contingency planning” refers to more than
preparing for major catastrophes and natural disasters.
It can also put you in a position where you are susceptible to
more prevalent concerns, such as the loss of data, staff, clients,
or commercial relationships.
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Contingency planning is a response to risk faced by an
organisation, however, in certain circumstances, it may be
safer or more cost-effective to deal with it in other ways and
to avoid risk, such as by investing in new equipment or to
share the risk by purchasing an insurance policy.
Alternatively, one can choose not to formally plan for certain
low priorities risk but to manage the risk when it does occur.
The COVID-19 epidemic illustrated how quickly entire
organisations may change how they work, such as everybody
working from home all of a sudden.
Contingency Planning begins with the identification of both
beneficial and unfavourable events that could possibly derail a
strategy or strategies.
It involves the following:

• Specifying trigger points.

• Estimating when contingent events are likely to occur.

• Assessing the impact of each contingent event.

• Estimating the potential benefit or harm of each

contingent event.

• Developing alternate plans.

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• Being sure that the contingency plans are compatible
with current strategy and that they are financially
feasible.
When you are formulating your backup plan, you need to
keep this information in mind.
It is necessary for contingency planning to function properly in
any workplace setting, whether there are people physically
present, people working remotely, or a combination of the
two.
It is essential to ensure that the contingency plan is adequate
for its intended use in order to reduce the risk of the
company’s failure to continue operating in the event that
unanticipated circumstances take place.
The following points should be included for each potential risk:
a) Landscape.
b) Trigger.
c) An overview of the feedback.
d) Make people aware of it.
e) Important responsibilities.
f) Timeline.
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Forecasting:
The process of predicting or estimating the future based on
the evidence from the past and the present is referred to as
forecasting.
The scope of forecasts may be comprehensive or limited.
*The process of forecasting gives knowledge about the
possible occurrences of the future as well as the implications
those events will have for the business.
*It is not possible for forecasting to lessen the complexities
and unpredictability of the future. Having said so, it boosts the
management’s confidence in their ability to make a decisive
essential decision.
*Managers at different levels may be given the responsibility
of making forecasts, or external or internal economists and
statisticians may be employed for the task.
*Since forecasting makes use of a wide variety of methods,
another name for the discipline is statistical analysis.
Types of Forecasts:
1. Long Term Forecasts:
Forecasting for the long term typically covers a period of time
ranging from three to five years.
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It gives an overarching perspective of the company’s
monetary requirements as well as the availability of the
investable surplus in the foreseeable future.
Advantages of long-term forecasting:
The following are some advantages of making long-term
forecasts:
*Improved asset management.
*Systematic leveraging and deleveraging.
*Multiplication of earnings through the maintenance of cash
reserves.
*Evaluation of variances in order to monitor performance.
Disadvantages of long-term forecasting:
The following are some of the drawbacks of making long-term
forecasts:
*The unpredictable nature of the economy.
*The absence of historical knowledge.
*The deficiency of the appropriate range of technologies.
*The limits imposed by silent data on excel.
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2. Medium Term Forecasts:
For making relatively minor strategic decisions pertaining to
the functioning of the firm, projections over the medium term
are generated.
They play a crucial role in the operational budgeting as well as
the business budgeting, and the budget of the firm is formed
based on these projections.
3. Short Term Forecasts:
The term “short term forecasting” refers to planning that is
done for a period that is relatively brief, with the planning
period being less than one year and the duration ranging from
one to six months.
Advantages of short-term forecasting:
The following are some advantages of making short-term
forecasts:
a) Reduced need for both time and money to complete the
project.
b) Assessing the current state of the company’s finances.
c) Conducting a performance scenario analysis in order to take
preventative action.
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Disadvantages of short- term forecasting:
Short-term forecasting has the following disadvantages:
a) The technology has a very high starting price tag due to its
complexity.
b) The payable account and the receiver account are both
quite difficult to understand.
c) Precision down to the granular level is required.
d) Late decision owing to limited collaboration.
Forecasting process and its elements:
Different situations will have different steps and elements of
forecasting process.
However, some of the common steps in most of the situations
may be mentioned as under:
1. Identifying and Developing the Structure:
Factors affecting future events are so complex and
innumerable that it is neither feasible nor desirable to study
and discover all of them.
The manager and forecaster should, therefore, identify the
strategic factors that materially bear upon the forecasts in
hand.
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It calls for analysing the internal and external factors and
discovering relations between them.
Knowing the trend of each of them is of great help in
forecasting.
2. Estimating future Course of Business:
Having prepared the ground and structure on which to base
different estimates, the next step is to make rational forecasts.
Those responsible for forecasting make use of statistical and
other techniques while projecting future business.
The experience, clairvoyance and participation of
management are important determinants of the quality of
forecasts.
3. Analysis of Deviations in previous forecasts:
We should thoroughly analyse the major deviations from past
predictions and find reasons for the same.
It should be used to refine the existing procedure of
forecasting to improve the quality of our present forecasts.
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ABFM MODULE - A
Chapter 2: PLANNING (PART-VII)
What we will study?
*All about Decision Making?
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Decision Making:
Actual selection of one course of action, from among several
alternatives, is called decision-making.
Decision-making is considered to one of the most prominent
functions of the management.
Decision-making is not confined to planning alone but also
embraces other aspects of management like organising,
staffing, controlling etc.
Because of several constraints faced by the organisation, the
management must consider several alternatives and choose
the one that is expected to be most appropriate for achieving
the goals.
Decision making is regarded as part of the planning process as
it involves selection from among various alternatives.
Decision-making is a rational process and, to have a high
degree of effectiveness, should be based on systematic
analysis of all the relevant facts and not based on just
intuition.
Decision making plays an important role in enhancing the
efficiency of the organisation as decisions relating to future
course of action, are taken in advance.
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Hierarchy of Decision makers:
The importance of various decisions, required to be taken in
an organisation, is not equal.
Generally, the top management concentrates on crucial and
strategic decisions and formulating broad policies.
Decisions, relating to routine matters are normally delegated
to middle and lower-level management.
This helps the organisation to decide on the kind of analysis
and research required to arrive at a conclusion, depending on
its importance.
Decision Making by Groups:
Whenever a group of people makes decisions, the process
becomes more comprehensive compared to the way decisions
are made by individuals.
Whether a particular decision is to be made by an individual
or a group depends on the policy of the organisation and
thinking of top management.
Before the task is assigned to a group to decide on a particular
matter, the exact scope of the group’s authority to make that
decision should be clearly spelt out.
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Advantages of Group Decisions:
Decision making by groups, generally, results in the following
advantages:
Thorough evaluation:
When a group is involved, the alternatives are evaluated more
thoroughly compared to that when individuals take decisions.
This increases the probability of decisions being better and
practical.
Implemention of decisions is easier:
As the feeling of involvement is more widespread, it is not
taken as an imposed decision and so, implementation is easier.
Enhanced team spirit:
The members of an organization, which involves groups in
decision making, are better motivated and have a better
sense of unity of purpose amongst them, as they make
decisions collectively.
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Disadvantages of Group Decisions:
Some of the disadvantages of group decisions may be as
mentioned below:
Time consuming and costly:
As many persons are involved and they have to consulted, the
process becomes time consuming and prompt decision is
difficult to come by.
Also, the cost involved in the process may be more as a
number of meetings are to be held more and more data from
different sources is be collected.
Disagreements and indecisions:
Different persons in the group may have their own different
point of view, resulting in conflicts and blame-games.
Unanimous decisions are difficult and sometimes, the group is
not able to take any decision.
No-participation or domination:
Sometimes, one or more members in the group may shirk
their responsibility resulting in lack of contribution by them.
Also, if one group member is of dominating nature, the views
of others do not get reflected in the result.
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Various Conditions for Decision-Making:
The conditions prevailing for decision making may be different
for different organisations.
Even for the same organisation, the conditions may not
remain same all the time.
These situations may be classified broadly into three scenarios,
as under:
Certainty:
If the decision maker knows exactly what is going to happen,
it is the condition of certainty, and he is able to precisely
forecast the outcome.
However, such conditions can be rarely expected to exist, in
real business environment.
Risk:
When information is available only partially or it is insufficient
to estimate the outcome precisely, the decision is to be taken
under the conditions of risk.
In real life, managerial decisions are mostly made under risk
conditions.
As the outcome is not certain, a probability is assigned to each
estimated outcome.
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When a probability estimate is assigned to expected outcome
based on the past experience, it is called objective probability,
and if it is assigned on the basis of intuition, it is called
subjective probability.
Various methods can be used in assigning probabilities to
various expected outcomes.
Uncertainty:
When the decision maker feels that probabilities for various
estimated outcomes cannot be assigned, it is called the
situation of uncertainty.
In such a situation, there is no way of measuring the
likelihood attached to each estimate.
Principles of Decision Making:
The effectiveness of the process of decision making mainly
relies on quality of data available, analytical, and judgmental
skills and experience of the decisionmakers.
However, there are a few principles which, if followed by the
decision makers, will be helpful in enhancing the probability
of the decision being correct.
These principles of decision making can be summarised as
under:
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Principle of Definition:
Correct identification of issues involved goes a long way in
arriving at a better decision.
It is, therefore, important to be aware of the exact problems.
After the exact problems have been correctly identified and
defined, the work of the decision maker becomes easier.

Principle of Evidence:
Whenever a decision is based on evidence, it is likely to be
better compared to decisions taken on the details which are
not backed by evidence.

Principle of Identity:
In a decision-making process, it is important to consider, with
an open mind, the viewpoints of all the people involved,
before taking a final decision.