3.6.3 - Scenario Planning Flashcards
What is Scenario Planning ?
Scenario planning is the process of anticipating possible changes in a business’s situation and devising ways of dealing with them. It incorporates the features of contingency planning.
The idea is that if we look creatively at what the future could look like (e.g. energy needs), the drivers and the implications that a business can create a series of strategies to handle those situations
Key Risk - Natural Disasters
• A disaster can strike any organisation, large or small. It can arrive in the shape of storm, flood, fire, earthquake and even Tsunami
• It may take some time for the business to return to normal operation after an incident.
• Climate change means UK businesses must plan for extremes of weather
Key Risks - IT Systems Failure
• IT systems often contain data about: Customers details including; e-mails, phone numbers, addresses, supplier’s details, stock control information, how much stock is in the warehouse, location etc.
• Human resources data; sensitive information on contracts, pay rates, health matters and personal circumstances
• If this information is lost it could be disastrous for the business (and possibly the customers)
• Scenario planning means that adequate firewalls, backups and alternatives are planned for and in place
Key Risks - Loss of Key Staff
• When a key figure leaves whether it’s a band or a business, it can have serious repercussions on that organisation’s stakeholders.
• It is important to plan for the loss of key staff so that when it happens the business continues as normal
Degrees of Risk Mitigation
• There are degrees of risk mitigation and these depend of specific contextual influences and the overall attitude of the decision-makers in the business.
Degrees of Risk Mitigation - Risk Acceptance
• The balance between risk and reward is the very essence of business: without taking risks companies cannot generate profits
• There is a world of difference between calculated risks, taken with planning and careful judgement, and risks taken carelessly or unwittingly.
• An acceptance that there is an element of risk to every business venture is at the heart of successful business and risk management
Degrees of Risk Mitigation - Risk Avoidance
• Risk avoidance is the elimination of hazards, activities and exposures that can negatively affect an organisation’s assets.
• Whereas risk management aims to control the damages and financial consequences of threatening events, risk avoidance seeks to avoid compromising events entirely.
• For example a multinational pulling out of an unstable country
Degrees of Risk Mitigation - Risk Limitation
• The ‘bottom line’ for businesses is that some risks are both identifiable and manageable.
• Risks can be limited by
• Watching what is said and done to reduce
the possibility of being sued
• Managingdatacarefully
• Become a LTD to gain limited liability
• Hiring a good solicitor
• Havingplentyofinsurance
• This can also be done by investing in security systems such as CCTV for a business, or a dog or fences
• In the ICT a business may have a firewall or password protection levels
Degrees of Risk Mitigation - Risk Transference
• Buy some insurance!
• You buy car insurance in case you have a crash, not after you have a crash. It is protection against the risk (and the law)
• A business will buy insurance, for example:
• Public liability insurance covers the business for claims made against the business by a client or member of the public for accidental injury.
• Employers’ liability protects the business if an employee is injured and the business has been negligent.
Planning for Risk Mitigation
• Mitigation means the action of reducing the severity, seriousness, or painfulness of something.
Planning for Risk Mitigation - Business Continuity
• Business Continuity (BC) is defined as the capability of the business to continue delivery of products or services at acceptable levels following a disruptive incident
• Business Continuity is often described as ‘just common sense’. It is about taking responsibility for the business and enabling it to stay on course whatever storms it is forced to weather. It is about “keeping calm and carrying on”
• BC is about building and improving resilience in the business
• it’s about identifying the key products and services and the most urgent activities that underpin them and then, once that analysis is complete
• it is about devising plans and strategies that will enable the business to continue operations and enable it to recover quickly and effectively from any type disruption whatever its size or cause.
Planning for Risk Mitigation - Succession Planning
• Succession planning is defined as a process for identifying and developing potential future leaders or senior managers, as well as individuals to fill other business-critical positions, either in the short- or the long-term
• Succession planning is a process for identifying and developing internal people with the potential to fill key business leadership positions in the company.
• Succession planning increases the availability of experienced and capable employees that are prepared to assume these roles as they become available.
In addition to training and development activities, succession planning programmes typically include the provision of practical, tailored work experience that will be relevant for future senior or key roles.
• There is a “9 box” theory to succession planning* (p.26)
