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Conflicts, downturns, disasters, and pandemics place businesses in hazardous situations marked by low turnover, stagnant growth, unemployment, and even bankruptcy.

Frequently, these circumstances arise without knowledge. It is challenging to guide organizations through challenging circumstances and to predict the effects and severity of crises.

Financial planners and CFOs seek to address these situations, but they are frequently uncertain about what would work in the short term and what should represent their long-term Strategic Planning.

Uncertainties caused by recessions and natural calamities necessitate swift Business Strategy adjustments and measures. Financial planners should assess the impact of the crisis and reevaluate business objectives, but they frequently lack the expertise and data required to adequately model a crisis, propose strategies, and plan swift measures. In addition, altering their preparation in response to a disaster necessitates significant work, modifications, and approvals.

Generally, the initial reaction to an unpleasant circumstance is unexpected. Before jumping to conclusions and mindlessly executing tactics that could backfire, a crisis or distressing circumstance necessitates the answering of some crucial questions.

• Is it possible to reduce stress during times of crisis?
• Can our teams make use of makeshift Scenario Analysis tools?
• Would correcting the assumptions and analysis be helpful?
• Can uncertainty be quantitatively measured?
• Should adequate evidence be available to measure uncertainty and generate hypotheses?
• Do we have the foresight to predict future events and propose corrective measures?

In order to answer these questions and evaluate the likelihood of a crisis, its possible impact, and the viability of potential scenarios, senior executives frequently adopt three strategic options:

1. Do nothing.
2. Plan for the worst, hope for the best.
3. Consider all possibilities.

Prior to selecting a crisis planning and management strategy, senior leaders must evaluate the benefits and drawbacks of a variety of strategic alternatives. Let's examine these strategic options in greater detail.

Do Nothing

In times of uncertainty, economic downturns, and natural calamities, leaders frequently embrace the riskier tactic of doing nothing but monitoring the unfolding of events. This technique carries a high degree of risk, and the expected short-, medium-, and long-term consequences during a crisis are too catastrophic to be ignored immediately.

A strategy of inaction precludes possible, crucial liquidity operations and other near-term initiatives that could provide long-term advantages. A wait-and-see approach to crisis management may result in events that have a profound influence on an organization and its Transformation.

Plan for the worst, hope for the best.

The second strategic approach is anticipating a single unpleasant occurrence while ignoring all other potential outcomes. Multiple organizations plan for a single worst-case scenario in the belief that it will protect them from any unusual crisis situation. This approach could result in tragedies.

The majority of executives choose for the Worst-Case Scenario Planning strategy for risk management. However, this method is unsuccessful under normal circumstances or after the crisis has passed. In reality, if the market improves, such a strategy may render enterprises uncompetitive. The only response to a crisis should not be to develop a single worst-case scenario, review banks and asset portfolios to determine how they might behave in different situations, and evaluate strategic KPIs against many situations. In reality, ensuring preparedness for a single catastrophic catastrophe is a shortsighted strategy that can result in financial losses.

Consider all possibilities.

In order to cope with a crisis, executives must be able to predict all possible occurrences and evaluate their consequences, which is generally not fully understood until after the tragedy has occurred.

Interested in learning more about Scenario Planning in times of crisis and uncertainty?  You can download an editable PowerPoint presentation on Scenario Planning in Crisis here on the Flevy documents marketplace.

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