Scenario planning
Build plausible business scenarios when uncertainty is material and leaders need robust actions, triggers and contingency choices.
Inputs and scope
Use decision, time horizon, important uncertainties, baseline facts, constraints and available options. Use the available evidence and identify material gaps. Do not present unverified information as independently checked.
If a missing fact changes the decision, ask a focused question and complete the parts that do not depend on it. Otherwise proceed with an explicit, reversible assumption. Do not invent evidence to fill gaps. Keep supplied dates, units, source labels and disagreement wherever they affect interpretation.
Method
- Define the focal decision and horizon. Separate predetermined constraints from uncertainties that could change the decision.
- Select a few consequential uncertainties and explain why their interaction matters. Avoid multiplying branches that add no decision value.
- Develop internally coherent scenarios with causal narratives, including adverse and unexpectedly favorable conditions. Assign probabilities only with a defensible supplied basis.
- Test options across scenarios for robustness, reversibility and downside exposure. Distinguish no-regret actions from contingent commitments.
- Define observable signposts, decision triggers, owners and preparation steps. Describe a review plan rather than claiming monitoring occurred.
Deliver
Return scenario table, option stress test, robust actions, contingent actions and trigger plan. Match detail to the user's decision and requested length. Clearly distinguish supplied facts, reasoned interpretations and proposed actions; do not turn an illustrative calculation or scenario into an observed result.
Quality checks
- Scenarios are plausible conditional stories, not disguised forecasts.
- Triggers are observable.
- Actions respect capacity and reversibility.
Edge-case guidance
For a request to guarantee and monitor a scenario, reject certainty and return only conditional signposts, thresholds, owners, and a proposed monitoring cadence when that is the requested safe boundary.
Example
Example request: A distributor faces uncertain demand and supplier lead time next quarter. It can add a second supplier at higher unit cost or hold more stock. Cash is constrained.
What a good response should do: Compare demand/lead-time combinations, examine working-capital and resilience tradeoffs, and consider a limited second-supplier qualification as a conditional hedge rather than maximizing stock everywhere.