Finance · Forecasting · Component
The scenario set
The alternative paths worth planning for, each with what would trigger it and what the organisation would do.
The deliverable
What it is
Scenarios are useful when they differ in their drivers rather than in their outcomes. Three versions of the same forecast with different growth rates is sensitivity analysis, not scenario planning.
The value is in the prepared response. A scenario without a decided response is a worry that has been written down.
One level in
What it is made of
Each element is a constituent part of the component. Follow one to see the attributes it carries.
The scenarios
Each alternative path, described by what is different about the world.
3 attributes: Scenario · Financial outcome · Likelihood
LearnThe signals
What would indicate that a scenario is materialising.
3 attributes: Signal · Threshold · Watched by
LearnThe response
What the organisation would do under each scenario, decided in advance.
3 attributes: Response · What stops · Lead time
Learn
Scenarios that differ only in growth rate are sensitivity analysis. Make them differ in what is true about the world.
The other components in forecasting
The forecast
The current estimate of where the numbers are heading, over a horizon that rolls forward rather than shortening to nothing.
LearnThe accuracy record
Past forecasts against what actually happened, so that systematic bias becomes visible and correctable.
Learn