How to Budget in a Fog: Tactics for Volatile Times

In sailing, it’s not the wind that determines your destination, but the set of the sails. And in business, it’s not clarity of forecast that builds endurance, but the quality of the decisions made in uncertainty. If the last few years have taught finance leaders anything, it’s that volatility is no longer episodic—it’s chronic. And in this reality, budgeting is no longer about getting it “right,” but about building a framework that allows you to steer when the horizon disappears.

Traditional budgeting, with its once-a-year rituals, line-item debates, and assumed stasis, was built for a world that doesn’t exist anymore. It presumed that costs behaved predictably, customers signed contracts on schedule, supply chains delivered on time, and the external world generally respected internal plans. That world is gone.

Today, CFOs are asked to build clarity from chaos—to set direction in storms, not in calm. We are asked to provide not perfect foresight, but strategic foresight. That means budgeting becomes less a spreadsheet exercise and more a dynamic process—one grounded in flexibility, prioritization, and real-time learning.

The Illusion of Precision

Let’s start with the uncomfortable truth: precision in budgets during volatile periods is often a mirage. A budget that projects a 7.3% increase in Q2 marketing spend or a 2.2% decline in international revenues is comforting—but likely inaccurate. When inflation is unstable, markets are jittery, or consumer behavior changes with every headline, the granularity of a budget is less a sign of sophistication and more of false confidence.

The job of the CFO is not to predict the future, but to bound it—to define the plausible scenarios, assess the impact of each, and prepare the organization to respond. That doesn’t mean abandoning structure. It means embracing a new kind of structure: one built on rolling forecasts, scenario modeling, and real option thinking.

Rolling Forecasts: Updating the Lens as the Scene Changes

In a fog, you don’t navigate by looking at last year’s map. You use the instruments available to constantly reassess. That’s what rolling forecasts do. Instead of setting a 12-month plan once and defending it against reality, you update your forecasts monthly or quarterly, using real data to inform future decisions.

That doesn’t mean every department gets to rewrite their budget each month. It means finance maintains a living view of the company’s financial trajectory, adjusting for what’s happened and what’s likely next. Rolling forecasts shift the budgeting mindset from annual commitment to continuous calibration.

In practice, this means:

• Shorter planning horizons (e.g., next 3–6 months) with more frequent updates.
• Tighter integration with operational data (sales pipeline, bookings, churn, inventory levels).
• Explicit assumptions (e.g., FX rates, inflation, demand elasticity) that can be stress-tested.

It also changes how finance communicates. The role of FP&A evolves from budget enforcer to business partner—helping operators understand where flexibility exists and where it doesn’t.

Scenario Planning: Prepare for Ranges, Not Points

When visibility is low, you don’t bet on a single outcome. You plan for a range of them. Scenario planning helps companies test how they would respond to upside or downside shocks—not reactively, but with defined trigger points and playbooks.

Done well, scenario planning helps leadership answer questions like:

• What happens to cash flow if sales drop 20% in Europe?
• What if supply costs increase by 15% for two quarters?
• How much burn can we sustain if we pause new hiring?
• What if our top three customers delay payments by 30 days?

These are not hypothetical. They are stress tests. And they build resilience.

Importantly, scenarios must be tied to decisions. A scenario is only useful if it leads to a conversation: “If we enter Scenario B, we will delay the product launch, renegotiate vendor terms, and freeze executive bonuses.” That clarity builds confidence—not just in finance, but across the org.

Variable Cost Structures: Design for Agility

The best budgets in volatile times are designed to flex. That means identifying fixed vs. variable costs and being intentional about which levers can move, and when.

This isn’t about cutting costs—it’s about designing flexibility into the business model. Consider:

• Using contingent labor or outsourcing in areas with uncertain volume.
• Shifting fixed marketing spends to performance-based channels.
• Tying executive comp to real-time business performance.
• Structuring vendor contracts with exit clauses or usage-based tiers.

A finance team that understands its cost elasticity can not only respond faster—it can also proactively allocate capital to opportunities that emerge when competitors are frozen.

Resource Allocation: Prioritization Over Preservation

In foggy conditions, the temptation is to freeze. To pause hiring, hold budgets flat, and wait for clarity. But in practice, this rarely works. Time lost is opportunity lost. The better approach is to prioritize aggressively.

Not all costs are equal. Not all growth bets deserve equal patience. Finance leaders must partner with business units to determine:

• Which initiatives have clear ROI and resilience?
• Which ones are nice-to-haves?
• What can be paused without damaging long-term value?
• Where should we double down while others pull back?

In short, budgeting in volatile times is a capital allocation exercise—not just an expense containment effort.

Communication: Managing Expectations Internally and Externally

In uncertain times, the CFO’s job isn’t just to budget—but to narrate the budgeting process. Employees want to understand what’s happening and why. Boards want to know how the company is adapting. Investors want transparency, not false confidence.

The CFO must be a translator of uncertainty—not a denier of it.

That means communicating with:

• Clarity: “We are modeling three revenue scenarios based on X variables.”
• Candor: “If costs increase by 12%, we may not hit margin targets.”
• Calm: “We have runway and contingencies in place regardless of short-term shocks.”

This kind of communication builds credibility. It sets realistic expectations. And it helps the company stay aligned when the plan inevitably changes.

Mental Models: Thinking in Probabilities, Not Certainties

Perhaps most importantly, budgeting in a fog requires thinking in probabilities. This is not about abandoning judgment. It’s about calibrating it.

The best CFOs operate like investors. They assign confidence levels to forecasts. They recognize base rates. They build models that account for fat tails. They think like Bayesians—updating beliefs as new data arrives. And they design incentives that align to outcomes, not illusions of certainty.

In this mindset, budgeting becomes a tool not of control—but of clarity in complexity.

Final Thoughts

Fog, in business, is not always bad. It reveals which leaders can steer without visibility. It exposes which companies are built for resilience, and which are built for optics. And it forces finance teams to evolve—from spreadsheet managers to strategic enablers.

In Berkshire terms, the key is simple: allocate capital wisely, preserve trust with stakeholders, and never mistake motion for progress.

Budgets may start as guesses. But the discipline behind them—that’s where leadership shows.

And if you budget like every dollar counts, every option matters, and every forecast is just a snapshot in time—you’ll find your way through the fog just fine.