Building Scenarios | Toptal

As I mentioned in a few posts over the last two months, scenario planning (SP) is a process that enables an organization to depict possible futures (scenarios), consider their impact, and plan for these futures. And the importance of SP is often magnified in times of crisis, such as COVID-19, when organizations need to make fast decisions related to talent, finances, operations, and resources. As such, organizations will now likely spend more time on SP post-pandemic. This article provides a few insights on effective SP, including how to build and implement scenarios. As mentioned in the article, there will typically be three scenarios, although more can be necessary for more complex organizations: 1) A base-case scenario describes the expected outcome and is the basis of management’s objectives. 2) A worst-case scenario considers what the most severe outcome could be. 3) A best-case scenario is an ideal outcome. Using this 3 scenario framework, this article shows the impact of each scenario on net income as an example. While this article is written through the lens of “financial implications,” the same type of approach can be used to understand the talent implications of each scenario, such as skills required, # of people needed, location, to name a few. Other ideas are discussed on how SP can help managers understand and anticipate changes in performance and their drivers.