In a recent post I reviewed Black Swans and mentioned that I would have a posting about Shell Oil’s use of scenarios to identify future risks and opportunities.
First, what are scenarios?
Scenarios are pictures of possible futures facing an organization. They are developed via an amalgam of perceived trends and intelligence on possible actions of stakeholders. External factors such as economics, competition and market conditions are considered. Quantitative and qualitative tools such as econometrics/ statistical forecasts, Delphi technique, and surveys may be used. The results of all analyses are organized into comprehensive pictures of a number of possible futures. Shell pioneered this technique in the early 1970s and they still use it.
The Scenario page is nestled in the About Us/Strategy section. The main page offers much useful information — definitions, videos and a link to current scenarios — and great use of visuals and a slide-out menu of links to related information.
Access to scenarios in future decades is viewed by simply clicking on the year. In the upper right, see Blueprints: clicking on the + icons provides additional information about the scenario.
Deloitte (PDF) offer some useful advice on Scenarios and Corporate Governance —
Why do scenario planning?
The Risk Intelligent Enterprise utilizes risk information to influence strategic planning in three key ways:
- Risks are identified and analyzed when considering strategic alternatives and developing business/organizational strategy
- Risks of the strategy
- Risk appetite serves as a guidepost in setting strategy and allocating resources.
- Once business/organizational strategy has been selected, risks that might affect the organization’s ability to implement key strategies are identified and managed
- Risks to the strategy
Common risk management challenges include:
- Failure of modern risk management
- Information filtering
- Mental models
Desired results may include:
Better understanding of risk
- to the strategy
- of the strategy
Shared commitment and approach to:
- manage key risks to within risk appetite
- exploit risks where the organization has a strategic advantage
Want to know more? Here are some additional worthy resources–
The use and abuse of scenarios McKinsey Consultants
Why Scenarios? Global Business Network
Lucy is Editor at Corporate Eye