5 steps for planning 2021 budgets amid uncertainty

Kevin Sneader, global managing partner for McKinsey & Company, provides perspective on how corporate business leaders think in response to the coronavirus crisis:

How can business leaders approach budget planning for 2021 when the environment is so uncertain?

In short, I believe that the planning process for 2021 presents an opportunity to turn hard earned lessons from the COVID-19 pandemic. It's an enduring exercise that links strategy to value. Now, five steps are needed for this to happen.

First, stress test scenarios and assumptions to counter uncertainty. Two, reimagine the business from a zero base in order to determine key business drivers. Three, hold back some spending centrally, as contingency, to build flexibility and optionality into budgets. Four assign finance talent to support the highest priority areas, or topics in order to prevent burnout. Five, rethink decision-making with the explicit goal of de-biasing the planning process.Given the scale of disruption, means previously held beliefs likely no longer hold true. The past year has been full of challenges. 2021 will no doubt bring another set of challenges, but it's also a year when companies invest now behind resilience and sustainability are those that will emerge stronger, not weaker from this crisis.