Managing Business Uncertainty using IBP: Assumptions, Risks, and Opportunities

Are you struggling to manage uncertainty in your business? You are not alone, 90% of businesses fail to anticipate and prepare for future uncertainties, leading to costly disruptions and missed opportunities. Integrated Business Planning (IBP) can help, in this post, we'll explore how to dodge a bullet with it:??

In today's rapidly changing business environment, uncertainty is normal. A recent acronym refers to this as VUCA - variability, uncertainty, complexity, and ambiguity. ?

As businesses face unprecedented challenges and disruptions, managing VUCA has become an essential skill for success. Integrated Business Planning (IBP) is a key process that provides a framework for aligning strategy, innovation, sales and marketing, operations, and finance. However, the very nature of IBP trying to future plan makes it prone to future uncertainty, which is why it is important to focus on assumptions, risks, and opportunities.

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Assumptions are the foundation of every forecast and plan. They provide the basis for decision-making and help businesses predict future outcomes. However, assumptions are not constant and can change over time. Therefore, it is important to time-phase assumptions and make them visible for diligent and frequent review. In my opinion, management should spend as much, if not more, time reviewing the assumptions as it does reviewing the numerical forecasts and plans. Clearly listing the key assumptions and treating them as a learning opportunity, businesses can adjust and improve future assumptions.

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Risks and opportunities 'buffer' assumptions with upsides and downsides. With lots of uncertainty, businesses are likely to have sizeable risks. On the flip side, this also means sizeable opportunities. It is crucial also to make risks and opportunities visible and review them diligently and frequently. Proactivity is also key to managing risks and opportunities. Assigning ownership for action plans to mitigate risks and seize opportunities and checking progress every month can help businesses stay on top of changes. Creating trigger points to sense when risks and opportunities are coming into play can also help businesses stay ahead of the game. By creating what-if plans (scenarios), businesses can prepare for risks that may come to life, but we will save scenario planning for another post.

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I recommend limiting your list to a maximum of the top 4 or 5 of each of your assumptions, risks, and opportunities. Pareto's rule should give you comfort that you are covering the main ones. If you try to cover more than a few, you will likely find that the 'important few' get lost in the 'detailed many'.

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Lastly, communicating risks and opportunities clearly to stakeholders is crucial. It ensures that stakeholders are aware of the uncertainty and allows businesses to manage their expectations. Managing VUCA with assumptions and risks & opportunities does not mean that challenges and disruptions go away. However, it does mean that businesses are better prepared to sense them, see them, and react to them. Managing uncertainty even a little better than the competition can make all the difference.

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What next? Use this simple 4-point checklist at the end of each IBP monthly review to check that you are managing them well:

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• were the key assumptions, risks, and opportunities visible and reviewed?
• did they cover the main issues?
• what adjustments or changes do we need to make?
• whom do we have to tell?

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What are your thoughts on managing uncertainty using IBP? Share your insights in the comments section.

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This post reflects my own views only and does not represent my employer in any way. The purpose is to share learnings amongst the wider IBP community and foster dialogue and development for us all.?