Scenario Planning? How Can We Help?
Considering all that’s happened over the last year, the case for robust scenario planning has rarely been stronger. Scenario planning—the practice of establishing strategies for variables in key business factors—helps organizations thrive amid uncertainty. To put it simply, scenario planning arms finance with the ability to incorporate responses as changes happen.
Without the ability to adjust revenue and expense assumptions over time, model multiple scenarios simultaneously, or see the impacts of new markets, staffing changes, or regulations, companies won’t have the ability to weather whatever comes next—much less respond to changes in real time.
In a recent webinar by the Association for Financial Professionals, two panelists explored the value of scenario planning and management in modern finance.
“COVID-19 has been described as being the great accelerator and really has forced all of us to do some sort of scenario or contingency planning over the last year,” said Jack Alexander, a former CFO turned adviser, author, and coach. “And my hope is that finance and operating executives will utilize scenario planning broadly in the future and integrate those more into the key planning and management activities.”
Alexander described working with a client pre-pandemic that was facing two major uncertainties. “In this case, the company was unsure whether the economy would continue to expand or contract, and they also had a significant contract that was up for recompete. So they had basically four possible scenarios on a two-by-two matrix combining those two uncertainties,” he said. “And then I also encourage the development of a black swan scenario too—low-probability, high-impact events—and that sort of covers things including what happened with COVID.”
Kinnari Desai, vice president and head of corporate finance at Workday, described a multistep process for accelerating the scenario planning process.
Align Leaders’ Top Priorities
Identify Key Drivers of Sustained Value Creation
Bring in External Data Where Relevant
Evaluate the Frequency of Scenario Planning and Adjust Accordingly
Three Elements to Enable Agility
A multiphase approach to scenario planning involves vision, recognition, and response—all of which lead to better business agility.
At IRIS Financial Group, being prepared for different scenarios over a 1-5 year plan is critical for our Financial Services Division. If you desire to be ready for unknowns in your industry, please reach out to us! https://www.irisfinancialgroup.com/get-started
https://blog.workday.com/en-us/2021/how-scenario-planning-future-proofs-finance.html?eid=enus_prognative_dblclkd_fortn_wd_fiat_bl_21.2738&utm_medium=prognative&utm_source=dblclkd&productfocus=wd&aud=fiat&assettype=bl&assetid=21.2738&pblr=fortn
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