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Published on August 18, 2016 |
In an ideal world, your company would follow a linear path to increased growth and profits. The reality, however, is that competition, ambiguity, and complexity present unique challenges, demanding careful forecasting and preparation to handle financial uncertainties. By arming itself with intelligent information and analysis, your company can remain flexible and proactive—able to quickly respond to changing conditions.
This is where scenario planning comes in. Adapted from methods utilized by military intelligence, it can help you maintain equilibrium despite unexpected or significant market shifts.
Flexibility and adaptability is key, especially when outcomes can vary widely. Approaching capital investments and market strategies with an outline of possible results and responses allows your financial team to prepare realistic forecasts while remaining adaptable no matter what circumstances arise.
It’s not enough to brainstorm outcomes and strategies. Your financial team needs to be deliberate in determining internal and external driving factors, and choosing specific projects to tackle. Questions such as, “How will the addition of 10 employees affect our bottom line?” or “Should we expand to a second office location?” can provide parameters for focused discussions.
Once you’ve settled on scenarios, outline implementation plans with your team. But don’t rely upon this one-time session. Situations change. So continually evaluate data, internal and external influencers, and the effectiveness of past planning. From there, your team can project the financial impact of possible responses to push toward a brighter financial future.