First used in the 1950s to assess potential effects of a nuclear war, scenario planning offers practical benefits for CFOs and other finance professionals today. Factoring in a range of political, economic, social, technological, legal, and environmental variables, scenario planning enables these decisionmakers to evaluate and strategize for future outcomes.
Do engage experts from across the organization for a cross-functional process. Scenario planning benefits from a variety of perspectives.
Don’t rush the process. It's as much a creative exercise as it is a strategic one. Allow time for all participants to engage creatively, as some need more time to make that mental shift.
Do assemble an assortment of data. Combine traditional financial data – like balance sheet and cash flow – as well as non-financial metrics. These might include pipeline or sales volume, and HR headcounts.1
Don't go light on the details. Build out your plan with enough information to be actionable and measurable.
Do focus only on the scenarios that are most likely to happen and have the greatest potential impact to the business.
Don't try to imagine every possible scenario or try infinitely new combinations of uncertainties.
Do plan for worst- and best-case scenarios. Be prepared to both mitigate potential negative outcomes, as well as take advantage of positive ones.
Don't get hyper-focused on or identify only slight variations of one specific scenario.2 Overcome common biases by imagining different outcomes.
A total of four scenarios is ideal.
Do offer strategic insight. Finance professionals should go beyond line item discussions and suggest alternate courses of action.
The most important “do” in scenario planning is to remember it is a continuous process. Review and revise your plan when conditions change and as assumptions evolve.
Contact Synovus Treasury and Payment Solutions, your Treasury Consultant, or Relationship Manager to learn more.
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