We have limited Greek content available. View Greek content.

Management Tools

Scenario Analysis and Contingency Planning

Scenario Analysis and Contingency Planning

Scenario Analysis and Contingency Planning is a process that allows executives to explore and prepare for several alternative futures.

  • min read

Article

Scenario Analysis and Contingency Planning
en

What Is Scenario Analysis and Contingency Planning?

Scenario Analysis and Contingency Planning is a process that allows executives to explore and prepare for several alternative futures. It examines the outcomes a company might expect under a variety of operating strategies and economic conditions. Contingency planning assesses what effect sudden market changes or business disruptions might have on a company and devises strategies to deal with them. Scenario analysis and contingency plans avoid the dangers of simplistic, one-dimensional, or linear thinking.

Usage and satisfaction among survey respondents

By raising and testing various “what if” scenarios, managers can brainstorm together and challenge their assumptions in a nonthreatening, hypothetical environment before they decide on a certain course of action. Scenario Analysis and Contingency Planning allows management to pressure-test plans and forecasts and equips the company to handle the unexpected.

How Is Scenario Analysis and Contingency Planning Implemented?

Key steps in a Scenario Analysis and Contingency Planning process are:

  • Delineating critical market and competitive uncertainties potentially impacting the business
  • Defining extreme, but plausible, scenarios
  • Testing the impact of each scenario on future business performance
  • Identifying no-regret moves that are valuable under most or all scenarios
  • Determining big bets, tied to the scenario in which leadership has the most conviction, surfacing strategic hedges and options
  • Designating trigger points and signposts to highlight changes
  • Establishing regular forums to monitor signposts and decide corrective actions
  • Developing contingency plans tied to significant changes in signposts
  • Being prepared to change course if necessary

 

What Are the Common Uses of Scenario Analysis and Contingency Planning?

By using Scenario Analysis and Contingency Planning, a company can:

  • Challenge widely held beliefs and assumptions about the business and its strategic direction
  • Surface critical factors that can influence the company’s future course
  • Make long-range planning more dynamic and consequential
  • Develop a clearer view of the future
  • Achieve a higher degree of organizational learning
  • Selected references (click to expand)
Read the Brief

Management Tools & Trends 2023

On the 30th anniversary of our survey, managers seem surprisingly upbeat.

Tags

Έτοιμοι να μιλήσουμε

Συνεργαζόμαστε με φιλόδοξους ηγέτες που θέλουν να καθορίσουν το μέλλον και όχι. Όχι να κρυφτούν από αυτό. Μαζί, επιτυγχάνουμε πετυχαίνουμε εξαιρετικά αποτελέσματα.