Forward-looking data

Posted on 2018-06-28
Forward-looking data

Forward-looking data (FLD) is used to forecast future business conditions to better align present business practices for greater success. Financial projections, future goals, schemes for planned operations and estimates of future economic performance, all fall under the course of action that are planned under FLD. Data analysis is made through assumptions about current business practices, business conditions and other investigative actions like forecasting budgetary concerns or fund availability, valuations, financial disinvestment analysis, possible future business conditions and outcomes modeling, sensitivity analysis, and reforecasting.

Why Forward-looking data is essential for the current real estate scenario

Most real estate professionals predict future industry environments through the study of backward-looking data which includes information on events that occurred over the elapsed year like financials, leasing activity, occupancy numbers and other factors. Real estate professionals utilize this data to decide on how to manage assets for the coming year. This method of predictive analysis is highly erroneous since it hinges on information that is fragmented and flawed.

Investors need to make financial decisions based on economic performance reports. This information is important for investors to determine the quality and sustainability of the company’s corporate performance. Based on information gleaned out of transparent accurate data will ensure continued trust of the investors in the long term.

Forward-looking data is not a crystal ball prediction

People believe that FLD is merely guesswork, but the truth is that it is a scientific and well thought out process. One aspect of FLD reporting is to explain the resources available to a company. It does not just state facts like employees are an asset, but uses quantifiable data to provide insights into how to develop and manage the asset in the future, how and also the company’s commitment to the resource. Such information that provides measurable KPIs for financial and non-financial resources have higher accuracy and are much closer to the future trends.

Challenges of reporting with forward-looking data

Disclosure of sensitive information

Many real estate firms have shied away from embracing the FLD process of reporting, since they believe disclosing certain information might compromise their competitive advantage. When reporting internally, real estate firms can disclose any information without prejudice. When publishing their company’s performance, the firm can use an approach wherein they only provide information to the investors that help them understand the viability of their performance in the long run. Withholding information that is not required for the investors and is critical to the company will not compromise the interests of the company.

For example: Pharma companies reveal product details like stage of development, launch plan, market size and other details, but withhold the facts of patent. Thus, they are able to showcase the future goals of the company without losing its competitive edge.

Profit predictions

When disclosing profit predictions, additional checks from regulatory authorities could be a potential pressure for the company in question. This may compel companies to meet set forecasts rather than focus on value delivery. In this context, providing a broader picture of the firm through contextual information would lead to minimizing the risk of profit prediction.

For example: Presenting market trends, strategies that are clearly presented and non-financial drivers of performance instead of profit forecasts will be more than adequate to showcase future company performance.

FLD Why use FLD?

Creating better opportunities for data management

The most important factor to increase the effectiveness of FLD is to collect quality data since information can help make good business decisions and get better results.

Continually developing their analytical capabilities

Stagnation will be the death of the FLD approach; hence, the continual review and updating of predictive work is essential.

Structuring data for better operation and delivery

Ensuring different data management systems do not work in silos but are organized to work in tandem will help eliminate errors.

The shift to FLD does not mean real estate personnel should write off backwards-looking data. The true strength of Forward-looking data can be gleaned by using it in tandem with backwards-looking data to create a holistic system of data management that brings the most effective predictions.

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