Scenario Analysis Flashcards
How can scenarios can be constructed and used?
- Scenarios can be constructed through:
- selecting objectives and boundary conditions.
- selecting themes
- selecting actors & factors
- developing mini-scenarios for each theme
- reducing number of mini-scenarios
- writing full scenarios - storylines
- Scenarios are used when there is an uncertain future and you cannot make a prediction. When you have to identify and/or address the uncertainties.
What are the different types of forecasting methods?
Types of forecasting methods:
- Judgemental methods (individual expert opinion)
- Narrative methods ( developing consistent stories)
- Extrapolative methods ( based on the data of past values of a forecasted variable + assumption that future will evolve in accordance with the pattern of historical behaviour)
- causal and mathematical models ( e.g. single equation regression model or other “causal” models e.g system dynamics models)
Can different types of forecasting methods be combined? Give an example.
Yes, for example, you can develop a mathematical model to obtain a quantitative scenario, then explain it with a narrative and test it against expert opinion.
Explain these concepts: prediction; exploration & scenarios; projection; and speculation. And where would they be placed on the causality versus uncertainty graph?
Prediction is…
What is the scenario?
It is a plausible description of how future events may resolve based on ‘if-then’ proposition.
What is a scenario analysis?
Scenario analysis is a procedure to develop a number of plausible futures - a set of scenarios. Comparing the results of those scenarios. And evaluating and communicating the consequences.
What is the goal of scenario analysis?
The goal of scenario analysis is to explore possible futures. In particular, it is useful:
- to anticipate future developments;
- to evaluate and test different strategies to respond to these developments;
- to assist decision-making through raising awareness about the uncertainty of the future.
What are the elements of a Scenario?
Elements of a scenario:
- the base year ( or period) and a description of the state of things in this period;
- time horizon and time steps - and a description of the state of things at that time;
- geographic coverage - city, country or global?
- a description of step-wise changes
- driving forces or uncertainties - the main factors that influence the step-wise changes of the scenario.
- storyline - a narrative that describes important aspects of the scenario, explaining the relationship between the driving forces and the events.
What are the different types of scenarios?
Types of scenarios:
- qualitative or quantitative
- narrative and storylines
- specyfying assumptions
- data needs and model development
- exploratory (‘descriptive’) or anticipatory (‘perscriptive’, ‘normative’)
- Speculation or precision
- Extrapolation or simulation
- Baseline/ policy
- Expert-based or participatory?
What are the advantages and disadvantages of qualitative scenarios and quantitative scenarios?
Qualitative scenarios:
advantages: interesting, understandable, represent views and complexity of various interests and ideas
disadvantages: vague, arbitrary, do not represent any numerical value, hard to test or identify any underlying assumptions.
Quantitative scenarios:
advantages: can identify/test underlying assumptions; “scientific” based on models, has numerical data.
disadvantages: models have a limited view of the world and are often not transparent.
Combining qualitative and quantitative is a good idea e.g. SAS approach.
What are exploratory vs. anticipatory scenarios?
Exploratory ( present -> future )
Departure point is the current situation and then describe the steps that lead to a future situations
Anticipatory (future-> present)
Start with a prescribed future situation ( optimistic, pessimistic, neutral) and then work backwards to visualise how this future could emerge.
What are the limitations of scenario analysis?
Our ability to explain the trends of the past makes it difficult for us to accept the limits of our forecasting abilities.
What is SAS approach?
The SAS approach produces both qualitative information (storylines) and quantitative information (model calculations) and combines their advantages, and is an iterative process engaging both stakeholders and environmental modellers.
What are the steps in SAS scenario development?
- Define the objective and boundary conditions
- Objective: what should the scenario analysis accomplish? Examine the future state of the environment? Test future strategies? Inform managers about emerging problems? Other?
- Boundary conditions: base year, time horizon, time steps, geographic coverage
- Select themes
- Themes should be based on the main uncertainties or questions about the future.
- Select actors & factors
- Main actors or stakeholders – groups of institutions that will play an important role in the scenario (e.g. financial institutions, governments, special interest groups).
- Main factors (drivers or pressures) – main variables that will play an important role in the scenario (e.g. rate of increase of market share, number of employees in the firm, rate of subsidies
- Develop mini-scenarios for each theme
- Reduce the number of mini-scenarios (e.g. reduce implausible ones or combine very similar ones) but never an odd number
- Write full scenarios - storylines ( + causal diagrams)
Explain these concepts: prediction; exploration & scenarios; projection; and speculation. And where would they be placed on the causality versus uncertainty graph?
- prediction is something that is most likely to happen ( evidence based). There is a high probability of something happening and it is on the upper left of the graph of causality over uncertainty. It is low on uncertainty and high on causality.
- Exploration& scenarios is something that has multiple plausible futures. There is high uncertainty and high causality. It is in the upper right of the graph.
- Projection is something that is most likely to happen but only statistics based. There is low uncertainty but also low causality. It is on the bottom left.
- Speculation is something that we have very little knowledge about in terms of how it will play out in the future. It is close to a guess. There is high uncertainty and low causality. It is on the bottom right of the graph.
