Wednesday, October 10, 2007

Scenario and Contingency Planning

Description Scenario Planning allows executives to explore and prepare for several alternative futures. It examines the outcomes a company might expect under a variety of operating strategies and economic conditions. Contingency Planning assesses what effect sudden market changes or business disruptions might have on a company and devises strategies to deal with them. Scenario and contingency plans avoid the dangers of simplistic, one-dimensional, or linear thinking. By raising and testing various "what-if" scenarios, managers can brainstorm together and challenge their assumptions in a non-threatening, hypothetical environment before they decide on a certain course of action. Scenario and Contingency Planning allows management to pressure-test plans and forecasts and equips the company to handle the unexpected. Methodology The key steps in the Scenario and Contingency Planning process are to:
Choose a time frame to explore;
Identify the current assumptions and thought processes of key decision makers;
Create varied, yet plausible, scenarios;
Test the impact of key variables in each scenario;
Develop action plans based on either the most promising solutions or the most desirable outcome the company seeks;
Monitor events as they unfold to test the company’s strategic direction;
Be prepared to change course if necessary.Common uses By using Scenario and Contingency Planning a company can:
Achieve a higher degree of organizational learning;
Raise and challenge both implicit and widely held beliefs and assumptions about the business and its strategic direction;
Identify key levers that can influence the company’s future course;
Turn long-range planning into a vital, shared experience;
Develop a clearer view of the future;
Incorporate globalization and change management into strategic analysis.

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