Scenario-based financial planning: the case of Ukrainian railways

Olha Kravchenko; Nadiia Bohomolova; Oksana Karpenko; Maryna Savchenko; Nataliia Bondar; Olha Kravchenko; Nadiia Bohomolova; Oksana Karpenko; Maryna Savchenko; Nataliia Bondar

doi:10.3934/NAR.2020013

National Accounting Review

2020, Volume 2, Issue 3: 217-248. doi: 10.3934/NAR.2020013

Previous Article Next Article

Research article

Scenario-based financial planning: the case of Ukrainian railways

1.
Department of Finance and Credit, State University of Infrastructure and Technologies, 19, Ivana Ohienka str., Kyiv, 03049, Ukraine
2.
Department of International Economic Relations, Vasyl’ Stus Donetsk National University, 4, Akademika Yangel str., Vinnytsa, 21007, Ukraine
3.
Department of Economics, National Transport University, 1, Mykhayla Omelyanovycha-Pavlenka str., Kyiv, 02000, Ukraine

Received: 04 May 2020 Accepted: 28 June 2020 Published: 02 July 2020
JEL Codes: O21, D80, C53, L92

The crisis in the global and national economies negatively affects the predictability of companies. In such conditions, it becomes impossible to correctly forecast and plan based on the traditional methods and models. Therefore, the aim of this study is to develop an approach to forecasting and planning in conditions of high uncertainty in the functioning of companies. The methodological basis of the study is evolutionary-institutional management, which allows to consider the development of the company as a complex evolutionary process. A scenario approach is used as the basis for forecasting, which allows to study the dynamics of any company in an unstable environment. The study includes three blocks: developing scenarios, scenario forecasting, financial planning. The study is conducted based on data on the functioning of Ukrainian Railways, JSC, which is the operator of the rail infrastructure and the national carrier of goods and passengers in Ukraine. Scenarios are developed considering the specifics of the products of rail companies and based on factors (key uncertainties) that determine the effectiveness of their functioning. Scenario forecasting is based on considering the peculiarities of the company's production process, its cash cycle, and the formation of financial resources. As a result, forecast estimates are obtained for three scenarios (optimistic, pessimistic, and negative). The financial planning model is developed as a system of interrelated models of cash flow planning (operational, investment and financial). This approach allows to plan the sources of funds of the company and their use, taking into account possible changes in the external and internal environment of the company and, as a result, ensure its stable functioning in the implementation of any scenario.
- financial planning,
- forecasting,
- scenario,
- cash flow,
- company,
- rail company
Citation: Olha Kravchenko, Nadiia Bohomolova, Oksana Karpenko, Maryna Savchenko, Nataliia Bondar. Scenario-based financial planning: the case of Ukrainian railways[J]. National Accounting Review, 2020, 2(3): 217-248. doi: 10.3934/NAR.2020013

Related Papers:

Abstract

The crisis in the global and national economies negatively affects the predictability of companies. In such conditions, it becomes impossible to correctly forecast and plan based on the traditional methods and models. Therefore, the aim of this study is to develop an approach to forecasting and planning in conditions of high uncertainty in the functioning of companies. The methodological basis of the study is evolutionary-institutional management, which allows to consider the development of the company as a complex evolutionary process. A scenario approach is used as the basis for forecasting, which allows to study the dynamics of any company in an unstable environment. The study includes three blocks: developing scenarios, scenario forecasting, financial planning. The study is conducted based on data on the functioning of Ukrainian Railways, JSC, which is the operator of the rail infrastructure and the national carrier of goods and passengers in Ukraine. Scenarios are developed considering the specifics of the products of rail companies and based on factors (key uncertainties) that determine the effectiveness of their functioning. Scenario forecasting is based on considering the peculiarities of the company's production process, its cash cycle, and the formation of financial resources. As a result, forecast estimates are obtained for three scenarios (optimistic, pessimistic, and negative). The financial planning model is developed as a system of interrelated models of cash flow planning (operational, investment and financial). This approach allows to plan the sources of funds of the company and their use, taking into account possible changes in the external and internal environment of the company and, as a result, ensure its stable functioning in the implementation of any scenario.

References

[1]	Akoff RL (1972) Planning in Large Economic Systems, Moscow: Soviet Radio.
[2]	Akoff RL (1985) Planning the Future of the Corporation, Moscow: Progress.
[3]	Alekseeva MM (2002) Company Activity Planning, Moscow: Finance and statistics.
[4]	Booher I (1999) Consensus Building and Complex Adaptive System: A Framework for Evaluating Collaborative Planning. J Am Plann Ass 65: 412-423. doi: 10.1080/01944369908976071
[5]	Brealey RA, Myers SC (2011) Principles of Corporate Finance, New York: McGraw-Hill.
[6]	Bruckmann В, Bomhauer-Beins А, Weidmann U (2015) A Qualitative Model to Evaluate the Financial Effects of Innovations in the Rail Sector. Transp Res Procedia 10: 564-573. doi: 10.1016/j.trpro.2015.09.010
[7]	Budget Revision (2020) Available from: https://nv.ua/opinion/sokrashchenie-byudzheta-2020-pochemu-pravitelstvo-umalchivaet-nastoyashchie-cifry-novosti-ukrainy-50079223.html.
[8]	Center for Transport Strategies (2020) Available from: https://cfts.org.ua/articles/vopros_na_milliard_chto_s_finansami_ukrzaliznytsi__1568.
[9]	Elliott G, Timmermann A (2016) Economic Forecasting, Princeton: Princeton University Press.
[10]	Graham J, Smart SB, Megginson WL (2009) Corporate Finance: Linking Theory to What Companies Do, Mason: South-Western Cengage Learning.
[11]	Fernandez A, Swanson NR (2017) Further Evidence on the Usefulness of Real-Time Datasets for Economic Forecasting. Quant Financ Econ 1: 2-25. doi: 10.3934/QFE.2017.1.2
[12]	Financial Times (2020) Global Economy Already Set for Historic Contraction. Available from: https://www.ft.com/content/9ac5eb8e-4167-4a54-9b39-dab48c29ac6c.
[13]	Ghysels E, Marcellino M (2018) Applied Economic Forecasting Using Time Series Methods, Oxford: Oxford University Press.
[14]	Gurău C, Dana LP (2020) Financing Paths, Firms' Governance and Corporate Entrepreneurship: Accessing and Applying Operant and Operand Resources in Biotechnology Firms. Technol Forecast Soc 53.
[15]	Hanke J (1992) Business Forecasting, New York: Simon&Schuster.
[16]	Houlden T (1995) How Corporate Planning Adapts and Survives. Long Range Plann 28: 99-108. doi: 10.1016/0024-6301(95)00056-O
[17]	International Monetary Fund (2020a) The Great Lockdown: Worst Economic Downturn Since the Great Depression. Available from: https://blogs.imf.org/2020/04/14/the-great-lockdown-worst-economic-downturn-since-the-great-depression/.
[18]	International Monetary Fund (2020b) World Economic Outlook, April 2020: The Great Lockdown. Available from: https://www.imf.org/en/Publications/WEO/Issues/2020/04/14/weo-april-2020.
[19]	Kjell J, Max K (2013) Applied Predictive Modeling. New York: Springer.
[20]	Kleiner GB (2011) A New Theory of Economic Systems and its Applications. Bull Russ Acad Sci 9: 794-808.
[21]	Kononenko O (2012) Analysis of Financial Statements, Kharkov: Vivat.
[22]	Kostyrko LA (2012) Financial Mechanism of Sustainable Development of Enterprises: Strategic Orientations, Systems of Supply, Adaptation, Lugansk: Knowledge Publishing House.
[23]	Kravchenko O (2019) Public-private partnership as a mechanism for financing infrastructure modernization. Balt J Econ 5: 112-117. doi: 10.30525/2256-0742/2019-5-1-112-117
[24]	Kravchenko O (2020) Scenario Analysis of the Assessment of the Rail Transport Impact on the Economic Growth (on the Example of Ukraine). Econ Stud J 1: 114-135.
[25]	Kravchenko O (2013) Scenario Financial Planning and Forecasting on Rail Transport: Theory and Practice, Kyiv: DETUT.
[26]	Lecours A (2002) L'approche Néo-Institutionnaliste en Science Politique: Unité ou Diversité? Polit Soc 21: 3-19.
[27]	Lidén T (2015) Railway Infrastructure Maintenance-a Survey of Planning Problems and Conducted Research. Transp Res Procedia 10: 574-583. doi: 10.1016/j.trpro.2015.09.011
[28]	Lindgren M, Bandhold H (2009) Scenario Planning-The Link Between Future and Strategy, New York: Palgrave Macmillan.
[29]	Linstone HA (2002) Corporate Planning, Forecasting, and the Long Wave. Futures 34: 317-336. doi: 10.1016/S0016-3287(01)00047-7
[30]	Liu Y, Zheng Y, Drakeford BM (2019) Reconstruction and Dynamic Dependence Analysis of Global Economic Policy Uncertainty. Quant Financ Econ 3: 550-561. doi: 10.3934/QFE.2019.3.550
[31]	Lukashin YP (2003) Adaptive Methods of Short-term Forecasting of Time Series, Moscow: Finance and Statistics.
[32]	Lusby MJ, Larsen J, Bull S (2018) A Survey on Robustness in Railway Planning. Eur J Oper Res 266: 1-15. doi: 10.1016/j.ejor.2017.07.044
[33]	Martelli A (2001) Scenario Building and Scenario Planning: State of the Art and Prospects of Evolution. F Res Quart Summer, 57-70.
[34]	Marx K (2020) Capital: a Critique of Political Economy, Moscow: Eksmo.
[35]	Ministry of Infrastructure of Ukraine (2020) Available from: https://mtu.gov.ua/.
[36]	Moiseeva EG (2010) Cash flow management: planning, balancing, synchronization. Handb Econ, 5. Available from: http://www.profiz.ru/se/5_2010/upravlenie_deneznymi_poto/.
[37]	National Development and Reform Commission of the People's Republic of China (2017) Vision and Actions on Jointly Building Silk Road Economic Belt and 21st-Century Maritime Silk Road. Available from: http://en.ndrc.gov.cn/newsrelease/201503/t20150330_669367.html.
[38]	Nelson RR, Winter SG (2002) The Evolutionary Theory of Economic Change, Moscow: Delo.
[39]	North D (1997) Institutions, Institutional Changes and the Functioning of the Economy, Moscow: Nachala Fond.
[40]	Peters TJ, Waterman RH (1982) In Search of Excellence, New York: Harper & Row.
[41]	Pillkahn U (2008) Using Trend and Scenarios as Tools for Strategy Development, Erlangen: Publicis Corporate Publishing.
[42]	Ramírez R (2016) Strategic Reframing: The Oxford Scenario Planning Approach, Oxford: Oxford University Press.
[43]	Ramírez R, Selin C (2014) Plausibility and probability in scenario planning. Foresight 16: 54-74. doi: 10.1108/FS-08-2012-0061
[44]	Ringland J (2008) Scenario planning for the development of a business strategy, Moscow: Williams.
[45]	Rittel HWJ, Webber MM (1973) Dilemmas in a General Theory of Planning. Policy Sci 4: 155-169. doi: 10.1007/BF01405730
[46]	Sherden WA (1998) The Fortune Sellers: The Big Business of Buying and Selling Predictions, New York: John Wiley & Sons, Inc.
[47]	Skurikhin VI, Zabrodsky VA, Ivashchenko PA, et al. (1980) Methods of OOrganizing Adaptive Planning and Management in Economic Production Systems, Kyiv: Naukova Dumka.
[48]	S&P Global Ratings (2020) Economic Research: COVID-19 Deals a Larger, Longer Hit to Global GDP. Available from: https://www.spglobal.com/ratings/en/research/ articles/200416-economic-research-covid-19-deals-a-larger-longer-hit-to-global-gdp-11440500.
[49]	State Administration of Railway Transport of Ukraine "Ukrayins'ka zaliznytsya" (2020) Available from: http://www.uz.gov.ua/about/investors/financial_statements.
[50]	State Statistics Service of Ukraine (2020) Transport. Available from: http://www.ukrstat.gov.ua.
[51]	Svetunkov IS (2010) Self-learning model of short-term forecasting of socio-economic dynamics, In: Models for the assessment, analysis and forecasting of socio-economic systems, Kharkov: Publishing House Inzhek, 11-32.
[52]	Sukharev OS (2020) Economic Crisis as a Consequence COVID-19 Virus Attack: Risk and Damage Assessment. Quant Financ Econ 4: 274-293. doi: 10.3934/QFE.2020013
[53]	Tarasyuk GM, Shvab LI (2003) Planning the Activity of the Enterprise, Kyiv: Caravella.
[54]	Teitz MB (2007) Planning and the New Institutionalisms, In: Institutions and planning, Amsterdam: Emerald Group Publishing, 17-36.
[55]	The World Bank (2020) The World Bank In Ukraine. Available from: https://www.worldbank.org/en/country/ukraine/overview.
[56]	Wade W, Wagner N (2012) Scenario Planning: A Field Guide to the Future, Hoboken, N.J.: Wiley.
[57]	World Bank Group (2015) Support to Public-Private Partnerships: Lessons from experience from client countries, International Bank of Reconstruction and Development, Washington.
[58]	World Economic Forum (2020a) Covid Action Platform. Available from: https://www.weforum.org/covid-action-platform.
[59]	World Economic Forum (2020b) The Global Competitiveness Index. Available from: https://www.weforum.org/reports/.
[60]	Zub AT (2007) Strategic Management, Moscow: Prospect Publishing House.

Reader Comments

Your name:*

Email:*
© 2020 the Author(s), licensee AIMS Press. This is an open access article distributed under the terms of the Creative Commons Attribution License (http://creativecommons.org/licenses/by/4.0)