AFM203 Study Guide - Midterm Guide: Scenario Planning
26 Jun 2018
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Scenario Planning Notes
1) What is scenario planning?
Scenario planning is a means for managers to visualize the future and assess how
they will respond in different situations.
2) What is a scenario?
A possible future situation based on drivers of uncertainty. Scenarios are a way of
understanding the forces at work today (e.g., demographics, globalization, technological
change, environmental sustainability, biotechnology) that will shape the future.
3) What are the three questions that are typically answered during scenario planning?
What could happen?
What would be the impact?
What are the implications for our organization?
4) Why has scenario planning become an important / relevant tool for many
organizations?
Helps with risk management and risk/return tradeoff, as opposed to risk
avoidance.
5) In which situations does scenario planning add value?
Situations of uncertainty and risk, with many variables producing many possible
future situations.
6) What role does scenario planning play in the risk management process?
Limits risk avoidance.
7) Which types of decisions are made using scenario planning techniques?
-Capital Investment
-Market Strategy
-Financing
-Human Resources
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8) What are the four broad types of scenarios? Provide 2 examples for each.
-Social
-Economic
-Political
-Technological
9) What should managers learn by participating in the scenario planning process?
-Increase awareness of the impact on uncertainty
-Allow them to envision how their behavior and decision making will change
under different conditions.
10) What are the two prerequisites for a successful planning process? How is senior
management support best achieved?
-Secure senior management commitment early in the process
oSenior management support is best achieved when the following conditions are
met:
The program is sponsored by a member of the executive team
The objectives and scope of the program are agreed by the executive
team
The project team keeps senior management informed and engaged
throughout the process.
-Select the right participants in the process
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Document Summary
A possible future situation based on drivers of uncertainty. Helps with risk management and risk/return tradeoff, as opposed to risk avoidance. Secure senior management commitment early in the process: senior management support is best achieved when the following conditions are met: The program is sponsored by a member of the executive team. The objectives and scope of the program are agreed by the executive team. The project team keeps senior management informed and engaged throughout the process. In the context of scenario planning, drivers are external factors that could influence the future environment and impact key internal variables. As soon as material uncertainties appear, it becomes dangerous to simply assume that the past describes the future. Short term vs long term: what are the guidelines for developing scenarios, scenarios should be organized around the key questions or issues defined in step 1, develop between two and four scenarios. Developing more than four scenarios can be confusing and counterproductive.
