What Is Scenario Planning?

By Craig Anthony

0 min read

Scenario planning, also called scenario analysis, is a method of forecasting that helps managers and business owners understand market trends so they can make better long-term plans. This reduces overall business risk and helps them discover how business variables affect the company.

The steps in scenario planning are:

  1. Identify drivers of change and create assumptions.
  2. Link these drivers in a meaningful way in a model.
  3. Produce at least six likely future scenarios.
  4. Conduct analysis to reduce these scenarios to about three.
  5. Run the models on each of these scenarios.
  6. Analyze the results and plan accordingly based on expected probabilities of each scenario actually happening.

References & Resources

Information may be abridged and therefore incomplete. This document/information does not constitute, and should not be considered a substitute for, legal or financial advice. Each financial situation is different, the advice provided is intended to be general. Please contact your financial or legal advisors for information specific to your situation.

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