Chapter 65- Scenario Planning

Question 1

Scenario planning

Answer 1

A strategic planning method designed to explore uncertainties, learn how to protect that business from their worst consequences and prepare how to exploit any opportunities that might present themselves.

Helps to:
•Clarify future uncertainties, identify risks + opportunities + prepare for their eventuality.

• Teach managers how events may transpire, develop and effect business.
• Understand the causes + effects of change in business + how to manage it.

Question 2

Important steps to scenario planning:

Answer 2

• Identify possible trends and issues- scan internal + external environment in effect to spot threats e.g. PESTILE
• Build possible scenarios- need to imagine range of possible scenarios that might affect different operations- different for every business.
• Plan response- impact of scenarios + plans to deal with them.
• Identify most likely scenarios- different events will have different probabilities therefore plan for most likely ones.
• Capitalise on scenarios- involves implementing planned responses when scenarios appear a likely reality.

Question 3

Risk assessment

Answer 3

Identify and evaluating potential risks that may be involved in an activity that a business proposes to undertake, ensuring compliance with health and safety legislation will help in stages of scenario planning.

Question 4

Possible scenarios

Answer 4

• Natural disasters- occur suddenly + cause by environmental factors e.g. floods, hurricanes, volcanoes, tsunamis, epidemic etc. Devastating + result in high levels of damage, death and disruption. E.g. £1 billion spent on repairing flood damage in UK businesses each year.
• IT system failure- larger businesses have more investment in IT= system failure or cyberattack= major disaster. Smaller businesses may use computers for emails, research + storage of data= vulnerable if breakdown. E.g. NATS Dec 2014 or hacker breached security of eBay.
• Loss of key staff- causes issues, smaller business means could close as usually one person who runs whole business.

Question 5

Risk mitigation plans

Answer 5

• Identify, assess + prioritise risks and plan response to deal with impact of these risks on the operation of the business.
• Set up in a location that is not vulnerable to flooding, earthquakes, bush fires and other potential hazards.
• Ensure that premises are constructed according to building codes that are designed for safety and protection
• Take out adequate insurance policies to cover losses resulting from disasters; for example, it may be possible to take out ‘business corruption cover’
• Ensure that data stored on computers is as secure as possible and that back-up systems are adequate

Question 6

Business continuity plan

Answer 6

Shows how a business will operate after a serious incident + how it expects to return to normal in the quickest time possible.

1. Carry out business impact analysis: This will identify those functions and processes that are essential to the running of the business. This involves gathering information so that appropriate recovery strategies can be designed. The process involves identifying the financial consequences of such incidences, like loss of revenue, customer defection, increased costs, penalties and disruption to business plans.
2. Formulate recovery strategies: These are the actions taken to restore the business to a minimum acceptable level after an incident. This will involve identifying the recourses needed, such as people, facilities, equipment, utilities, IT and materials to aid recovery. This may include contracting work to third parties.
3. Plan development: This involves developing a detailed plan to ensure that the recovery strategies are carried out in an organised way. A business is likely to appoint recovery teams, develop relocation plans, and document recovery strategies.
4. Testing and training: Once the recovery plan has gained approval it is necessary to design testing exercises and train staff in their roles during the execution of the recovery plan. The recovery teams will be the main focus of such training. After testing and training it may be necessary to update the business continuity plan to take into account an discoveries made during this process.

Question 7

Succession Planning

Answer 7

Identifying and developing people who have the potential to occupy key roles in a business in the future.

• Identify characteristics a successor should pose.
• Decide how successor will be found
• Undertake rigorous selection process
• Make the decision
• Communicate decision
• Implement a training + preparation