Scenario planning provides a unique ability to view potential future courses of action and plays an integral role in strategically managing an enterprise. It depicts complex issues simply and fosters contemplative culture when used properly. Scenarios have key objectives like managing uncertainty when distances between target points are significant, charting a path forward, and identifying opportunities. They provide early warning, agility, objective decision making, innovation, and help leverage and protect an enterprise's strengths and weaknesses. Scenario development often discovers powerful drivers of change and emerging trends. An example illustrates using scenarios to deconstruct the future, define uncertainty's impact, control strategic and operational changes, and make adjustments to plans.

1. Scenario Planning
The Eye of the Enterprise
Nikat Malik
August 2015
All Rights Reserved

2. Scenario Planning – The Eye of the Enterprise
Scenarios provide a unique ability to view the future course of action and therefore play an integral part in the astute management of an
enterprise. It is a way of thinking that can portray complex issues in a comprehensible manner. Hence its proper usage can infuse contemplative
culture into the enterprise and positive results. It is a craft that provides competitive advantage to an adept user. This was recognised in ancient
times by Alexander the Great who believed that military campaigns rarely proceed as anticipated, relied on scenario planning and proceeded to
conquer the world.
Scenarios have often been described as the art of managing uncertainty, especially when the
observable distance between target points is significant. In addition to a view of the future, its key
objectives also include charting a path forward and identifying opportunities. Scenarios provide
early warning, agility, objective decision making, innovation, leverage strengths and protect
weaknesses of the enterprise.
Scenario terms can vary depending on the foresight and management style of the enterprise. It is
critical to define the role of scenarios in strategic planning and performance measurement, as well
as type of scenarios in the framework eg. validity, fixed or adjustable, maintainable or throw away,
adaptive path and corrective action required.
During scenario development, the strategist often discovers particularly powerful drivers of change
and emerging trends. Continued efforts should search for predetermined outcomes, especially
unexpected ones, which provide new insight.

3. An example of its use is illustrated below:
 Primarily to deconstruct the future to identify asymmetric events, define uncertainty, and its impact on target objectives.
 Control strategic and operational change in operating environment and its impact on business objectives,
and make adjustments to plan.
 It is mandatory for scenario planning to participate in actual business operations, as a living part of strategy,
especially in light of changing environment.
 The following tenure and outlook governed its use to direct planning and control business performance on strategic and operational basis.
• Long term 10 year outlook provides direction to ensure sustained viability and growth of the firm
• Short term 3 year scenarios focus on control framework to ensure profits and customer retention
• Current term 1 year scenarios focus on operational variables to actualise annual plan with tactical manoeuvres
The colours and shading depict the preferred
path and options, brighter and stronger is most
preferred followed by fading as secondary
options.
Varying outlook and events depicted by options
are required to manage impact on desired path
and also to identify opportunities eg. an external
event may require adjustment thereby triggering
a specific course of action, say change in
government policy, or shift in demographic for
retail banking due to increase in migrant
population, or funding required by a key client in
construction industrial sector due to demand
from changing demographics.

4. The Eight Factor methodology was adopted in developing and implementing scenarios
:
• Identify key driving factors in operating environment
• Identify critical uncertainties
• Determine patterns of interaction and key relationships between variables
• Create scenarios to portray perceived realities at strategic and operational levels
• Ascertain implications of scenarios and possibilities
• Evaluate options and adjustments required
• Develop performance monitoring metrics
• Put in place a governance framework to guide scenario application,
measure performance, execute adjustments and achieve strategic objectives
The next step was to translate scenarios into decisions by understanding uncertainty and developing an executable strategy, define pre-
determined outcomes including unexpected events, detail unexpected events into demographic, economic, scheduled events,
unsustainable trend reversal; address reactions often ignored in business strategy; avoid herd mentality eg. senior executives start an
opinion and all follow.

5. The test of a scenario is how accurately it represents the manifestation of future
events and ability to adapt to the new dictate. Enterprise scenarios must test
impact on business model, profitability and solvency.
A very critical and a rarely used technique in this field is wide scoping. It is a
method to stretch scenarios beyond its usual horizon. It enables understanding
of all independent variables to provide an inclusive angle view of possibilities.
This technique was applied to great effect as it provided valuable and rare
insight into cause of occurrence.
A laboratory to model scenarios was set up with highly skilled business,
technical, economic and legal professionals to simulate possible reality. The
outcome was modelled into the business planning cycle with pre-determined
intervention points.
The result was applied accordingly to growing economic conditions and to economies in a downturn. In the downturn scenario the Bank avoids
acquisitions, avoid long term financing like infrastructure finance, opt for short term pay offs like micro finance, rely on fee income like
transactions and payments. Stable and stagnant economies did not command investment. Rapidly growing economies was treated as prime
market for acquisitions and aggressive new product development. Socially disturbed economies were not play fields.
The above resulted in a very resilient functional organisation with a high degree of confidence.
Scenarios are not predictions, do not comply with theoretical models, and must be implementable
Developing a base case is central to scenario planning - the most probable scenario is identified as the base case which has a degree of
certainty together with options, and strategy for the options.
Tail events are crucial to holistic scenario planning. They are used to develop strategies to navigate extreme events and in understanding
volatility. Including extreme or outer events help address dramatic downside impact.
In scenario planning, the strategist must recognize that future may not resemble the past and change may not be gradual.