4 min read

What is scenario planning?

Danielle Dahlstrom

Director of Product Marketing, Finance Solutions

Chart a course through uncertainty with an effective scenario planning process.

In hindsight, 2007 would have been a great year to unload your hefty variable-rate mortgage. Likewise, that invitation to decamp for the New Zealand flower farm—the one with the great Wi-Fi—back in 2019? Definitely go with that. And the Bitcoin you mined in 2016 but used to buy a latte? Uh, never mind. If only we knew what was coming, planning ahead would be easy.

Although you can’t know the future, you can imagine what it might bring. Faced with uncertainty, your best strategy is to think proactively about what might reasonably (and even unreasonably) happen in the future and craft plans around those scenarios.

Robust scenario planning helps you better understand the present, consider what might change in the future, and explore what those changes could mean for the business. It lets you imagine various plausible futures and explore ways to position your business accordingly. The scenario planning process raises awareness of potential risks, but also helps the business spot opportunities.

None of this is new. Businesses have always considered the future and bet on their best guesses. What is new is the pace of change and our technological ability to model it. Given the right tools, “what-if” scenarios can be data-rich, continuously updated, and able to quickly model the impact of changes for significantly faster, more informed decision-making.

Why do you need a technology solution to enable scenario planning?

The scenario planning process is an exercise of the imagination. In decades past, that meant blue-sky discussions and time-consuming efforts to quantify scenarios and track the hypothetical impact of various decisions.

The problem is volume and complexity. Useful scenarios need to be as complete and detailed as possible, continuously updated with the latest data, and most importantly, refreshed throughout with the impact of the strategies being considered. Scenario planning can be more effective when informed with external data sets, such as a macro-economic forecasts, to model a comprehensive impact on the business. The volume of data, and the need to dynamically make changes and understand the impact can quickly overwhelm spreadsheet-based scenario planning. A scalable and flexible technology solution is needed for finance users to incorporate a range of scenarios and quickly model and assess the business impact.

How does Anaplan help with scenario planning?

Anaplan lets organizations create robust, detailed scenarios that include all of the key internal and external data and drivers that impact the business. When a variable in the scenario is changed, the areas impacted by that change are updated instantly so all plans and forecasts are continuously up to date. Business leaders can experiment with the impact of external events, such as a supply chain interruption, and of internal changes, such as a new efficiency to lower costs. Anaplan gives you an immediate view of how these changes impact aspects of the organization and business outcomes.

What can modern scenario planning do for the business?

Uncertainty has entered the building. Businesses today know they have to be ready for major change and disruption at any moment. Having the ability to explore “what-if” scenarios and update them as circumstances and strategies change makes it easier to translate insight into action. When you can explore your options and make richly informed decisions quickly, the business can be more agile and resilient.

However, the true value of scenario planning is achieved not only through anticipating crises and mitigating risks, it’s in finding ways to improve and grow the business now and in the future. More visibility into the business paves the way for new ideas and greater efficiency. Meanwhile, more accurate and complete long-range forecasting, connected to financial plans and impact analysis, allows the business to recognize emerging opportunities early and be ready to act.

What does excellence in scenario planning look like?

To derive the greatest value from scenario modeling, you need a highly flexible planning environment to support the task, putting the power in the hands of business users with knowledge of the options being evaluated and allowing for quick creation of new “what-if” models. It should be able to incorporate data and drivers from all kinds of systems throughout the organization, as well as external information from partners, suppliers, and industry trackers. An effective planning tool should be powerful enough to process vast amounts of data extremely quickly, and able to connect stakeholders across the enterprise so they can collaborate around one set of facts with ease. Finally, it should use advanced algorithms and AI to reveal hidden risks and opportunities.

Anaplan’s unmatched ability to bring people, planning, and data together in one powerful platform delivers all of these capabilities and more, so your business can face an uncertain world with confidence.

Find out how Anaplan can enable scenario planning for greater speed and agility at your organization.

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