3.6.3 Scenario planning

Question 1

How do businesses deal with risk?

Answer 1

• contingency plans
• risk assessments
• staff consultation
• diversify product portfolio
• adaptive culture
• decision trees
• Ignore it
• market research
• financial calculations
• scenario plans
• deflect risk ie. insurance

Question 2

How would the marketing function deal with risk?

Answer 2

• avoid over-reliance

- test marketing (sales forecasting)

Question 3

How would the operations function deal with risk?

Answer 3

• JIC (hold extra stock)

- quality control and assurance (TQM)

Question 4

How would the finance function deal with risk?

Answer 4

• insurance premiums
• investment appraisal and comparison
• tests

Question 5

How would the HR function deal with risk?

Answer 5

• insurance
• recruitment plans
• succession planning
• training
• progression
• flexible working
• motivate staff

Question 6

What are the methods of risk management?

Answer 6

1) Risk management (identifying and dealing with the risk)
2) Scenario planning (planning for unforeseen events)
3) Crisis management (handling of potentially dangerous events)
4) Do nothing

Question 7

What are the steps in risk assessment?

Answer 7

• identify possible risk
• quantify possible costs
• attempt to quantify the probability that each risk might occur.

Question 8

What are the key risks in any organisation?

Answer 8

• natural disasters
• IT systems failure
• loss of key staff

Question 9

How would a business plan to mitigate risks?

Answer 9

• business continuity

- succession planning

Question 10

What is business continuity?

Answer 10

Resilience to change after a disastrous event

Question 11

In order for business continuity what must be in place?

Answer 11

• strong financial position to deal with short term implications
• clear lines of authority
• middle managers
• possibly a crisis team.

Question 12

What is succession planning?

Answer 12

Planning ahead for when a leader leaves and must be replaced.

Question 13

Is succession planning long or short term?

Answer 13

long term

Question 14

What type of business is succession planning often found in?

Answer 14

Large MNCs

Question 15

Why is succession planning important?

Answer 15

• ensures the new leader understands the culture and importance of the leadership role

Question 16

What are some positives of succession planning?

Answer 16

• minimises risk
• saves costs
• plan for future
• reassures staff and customers

Question 17

What are some negatives of succession planning?

Answer 17

• hard to implement
• doesn’t encourage entrepreneurship
• costly

Question 18

How would a firm mitigate against natural disasters?

Answer 18

multiple suppliers

Question 19

How would a firm mitigate against IT systems failure?

Answer 19

cybersecurity, back-up systems and have open communication with customers.

Question 20

How would a firm mitigate against the loss of key staff?

Answer 20

• succession planning

- active internal and external recruitment

Question 21

What is contingency planning?

Answer 21

An ongoing plan devised for an outcome other than the usually expected plan.

Question 22

Why do business use contingency planning?

Answer 22

• minimise impacts of foreseeable events

- to plan how the business will operate after the events

Question 23

What is crisis management?

Answer 23

The way in which management plan for and cope with unexpected crisis that poses a significant threat to the business.

Question 24

What is a crisis?

Answer 24

1) An event that is unexpected

2) Threatens the wellbeing of a business

Question 25

How do businesses handle a crisis?

Answer 25

• appoint a crisis manager
• recognise the authoritarian style
• determine whether the impacts will be long term or short term
• focus on activities that will mitigate or eliminate the problem
• look for opportunities

Question 26

How do businesses assess a crisis?

Answer 26

using:

• contingency plan
• risk assessment
• PESTLE
• SWOT
• PORTERS

Question 27

List the methods of reducing risk and their ‘magnitude’:

Answer 27

• scenario planning
• contingency planning
• risk assessment
• review PESTLE/SWOT