Inflation has reached 40-year highs, affecting people and organizations worldwide by increasing costs of basic needs and straining profit margins. Organizations must adapt to this inflationary environment by planning for it in addition to managing it.
The inflationary environment in 2022 and beyond
Inflation is often caused by a decrease in supply or increase in demand, leading to higher prices. Causes include supply chain disruption, reduction in oil production, and other energy-related factors. To better understand and adapt to inflation, Finance professionals should remember the three key points below:
- Inflation is a global problem, and rates vary by country
Inflation rates vary by country, highlighting the need for a strategy to manage and plan for inflation.
- There are many different indexes that help measure inflation, and each provides unique insights
When choosing an index for financial planning, it’s important to understand its components and relevance to the organization.
- Inflation affects industries differently
Finance professionals need to understand the impact of inflation on industries, current inputs, and assumptions for future modeling.
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