Without a doubt, there are several things to pay attention to when running a company. Besides studying the business’s cash flow, other crucial actions can be taken to ensure that the company performs optimally. Another important aspect of ensuring that your organization runs successfully is Forecasting and Scenario Planning. But what exactly is forecasting and scenario planning? How does it affect the progress of glue organization? Keep reading to find out.
Scenario planning focuses on the outcome of future events and effective planning for these events. In a way, scenario planning is based on a particular sequence of interacting events and critical decision points or initiatives. It offers enhanced flexibility and the ability to deal with future risk and uncertainty. Instead of focusing on purely quantitative forecasts, you plan for the entire scenario. It relates to identifying multiple plausible future events, identifying what could happen, and compellingly describing that outcome.
Often, scenario planning is a collaborative effort that involves several people within an organization. These people – from different levels within the same organization – come together to brainstorm and make active decisions on what’s to come. Along with all the number crunching and calculations, scenario planning usually has a creative side that focuses on bringing all the ideas together. During this type of planning, scenarios may either be short-term or long-term and based on multiple futures or possibilities.
On the other hand, forecasts are designed to assume that future events will remain the same as they are currently. When comparing present-day events and future forecasts, a forecast clearly doesn’t account for too many changes. When you also take a close look at things, it’s clear that forecasting is a less creative process that will not account for widespread changes in the business environment. These large changes are responsible for most of the challenges that an organization faces and contribute to the firm’s overall performance. Instead, this concept only considers minor differences that may occur in the business structure or employee performance.
The focus of forecasting looks inwards at actions that can be taken to improve how the organization operates. It fails to consider how much the outside world can affect it. Forecasts do not consider risk and uncertainty as a part of the entire research exercise. Rather, it focuses on quantitative inputs and the use of special methodology to predict any possible occurrences in the future. It bases these inferences on current events and historical data. Forecasting focuses on the short-term by using certainty-based or known variables to make inferences.
What Is The Difference Between Scenario Planning and Forecasting?
When comparing scenario planning and forecasting, it’s clear that scenario planning takes a general look at things by analyzing qualitative and quantitative data related to a particular risk. It utilises a top-down approach that looks at possible future events, how the portfolio will be affected by these events and how to respond to certain market situations. As a result, scenario planning is a more proactive and predictive concept than forecasting. While forecasting also has its benefits, it doesn’t cover up for what scenario planning offers.
As a reliable service provider that has worked with numerous organizations for many years, we are familiar with the use of both concepts and how they can affect the growth of your organization. Any innovative organization that’s prepared to take a leap and break its bounds must be ready to incorporate these concepts into its business model. We are a perfect fit to help you make that happen.