What are the benefits of using scenario planning for risk management in your industry?

Its crazy how we lock ourselves into assumptions, based on what we know about a business or industry. Many years ago, when consulting for a client, a basic scenario planning exercise showed us which products to prioritize for launch - the initial assumptions were thrown out of the window - and we managed to save costs for a product that the market responded to very well - it went on to become the cash cow for the business, when initially we thought it would take us months if not years to launch it

Scenario planning is a valuable tool for businesses because it offers a proactive approach to dealing with industry changes. Instead of merely reacting to shifts in the environment, it enables organizations to foresee various potential outcomes, evaluate their consequences, and ultimately make better-informed decisions. By doing so, it mitigates uncertainty and simplifies complex decision-making. Additionally, scenario planning encourages critical thinking by challenging assumptions and biases, fostering a more open exploration of fresh perspectives and opportunities.

Scenario planning is first of all a sensitivity analysis gauging the upside and downside of a plan. By brainstorming the assumptions, you will discover things you had not anticipated for Having broad contingency plans in place will gain upfront alignment with stakeholders and give you an early start even though you will be reworking your plan.

By brainstorming the assumptions, you will discover things you had not anticipated for Having broad contingency plans in place will gain upfront alignment with stakeholders and give you an early start even though you will be reworking your plan.

Scenario planning is indeed valuable because it provides several benefits for organizations. It helps businesses anticipate and prepare for potential future changes, reducing the risk of being caught off guard by unforeseen events. By systematically considering various scenarios, it enhances strategic decision-making, enabling companies to develop robust plans that can adapt to different circumstances. Additionally, scenario planning encourages critical thinking and challenges assumptions, fostering a culture of innovation and adaptability within the organization. Overall, it contributes to a more resilient and forward-thinking approach to business strategy.

By brainstorming the assumptions, you will discover things you had not anticipated for Having broad contingency plans in place will gain upfront alignment with stakeholders and give you an early start even though you will be reworking your plan.

Working through scenarios or “decision games” in which realistic, tough challenges are presented to a team that must work together in a real crisis is invaluable. There is an expression that those who sweat more in peace bleed less in war. It’s absolutely true in managing enterprise risk.

There may be a place to consider more extreme situations - to shock the participants or readers. Ideally, a few of the participants or facilitators are well trained in facilitating such sessions and can judge what is it that the participants deliberately fail or avoid to consider.

Common sense has to be a consideration in creating scenarios. It’s important that the developers use realistic situations, threats, and threat capabilities not superhuman or impossible hypotheticals. It’s also important to challenge the group working through a scenario by challenging their assumptions. I like to randomly strike a member from the team from communication or contribution based on an assumption that when crisis strikes so does Murphy (and his famous law that “what can go wrong, will”). It’s always the day that a company’s website gets hit by DDoS that the Deputy CISO is getting a surgery or had a car accident. Things like that help make scenario planning both realistic and challenging.

I recommend reading "The Art of the Long View: Planning for the Future in an Uncertain World" by Peter Schwartz: This classic offers practical advice on how to apply scenario planning in various contexts.

While scenario planning offers numerous benefits, it's essential to consider potential drawbacks as well. One perspective could be that scenario planning can be time-consuming and resource-intensive. Developing multiple scenarios, conducting analyses, and involving experts can require a significant investment of both time and money. In some cases, the outcomes may not justify the resources spent, especially if the scenarios created don't align with actual future developments. Therefore, it's crucial to carefully assess the cost-benefit ratio before committing to an extensive scenario planning process.

Scenario planning can also depend on research - there are academic and professional works that does such work for larger issues like an industry, country, or community. It can also help to consider what other companies are publishing (Eg economic outlook in financial reports) and do thought experiments of the complete opposite scenarios.