09 Nov 2020
Whilst most organisations recognise the value of scenario and contingency planning, our research at Oliver Wight has identified that many are not employing it with sufficient rigour to gain the full benefit. They are not creating the responses to potential alternative futures that are likely to have the most significant impact on their business.
To help organisations get Ready to Respond we have created a 10-step process for Scenario & Contingency Action Planning.
The first step involves Defining the entity and its current environment that you are creating Scenario & Contingency Action Plans for.
You may be thinking ‘of course we know about the entity, its our own organisation!’ but, in our experience, when this step is missed out, it can lead to uncertainty and confusion in understanding the outcomes that have the greatest potential to impact your organisation.
Adapted from the SCQuARE strategic thinking and presentation methodology, this step involves:
Once the entity and its current environment have been defined, the second step in the Scenario & Contingency Action Planning process is to identify the driving forces that could shape the organisation's future. Examples that are "top of mind" for most organisations today include:
The future impact of COVID-19:
A number of our client companies are currently wrestling with the timing and impact of a looming "COVID cliff" where existing government stimulus is predicted to be wound back, resulting in a significant decrease in business and consumer spending.
Other examples of external forces that could affect your business might include:
We have found two useful models for identifying potentially impactful uncertainties:
For organisations that operate a robust Integrated Business Planning (IBP) process, insights about future driving forces can come from the assumptions captured to support product, demand and supply plans out across the 24- to 36-month future planning horizon. Using IBP to zero in on the areas of uncertainty in the future planning horizon that could have the most material impact on the organisation is a fundamental element of IBP that turns reactive companies into proactive ones.
In our next article, we will look at how organisations can determine which of the driving forces identified constitute critical uncertainties they should create scenario and contingency plans for.