Scenario Planning and Horizon Scanning for Strategic Risk Management

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Scenario Planning and Horizon Scanning for
Strategic Risk Management

• www.samiconsulting.co.uk
• Robust decisions in uncertain times

SAMI Consulting 2006
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Agenda

• Defining our terms
• Strategic Risk
• Horizon Scanning
• Scenarios
• Example a project for the City of London 5
  stages
• Horizon scanning
• Scenarios
• Analysis
• Decisions
• Implementation
• 5 Questions to ask
• before starting on Scenario Planning or Horizon
  Scanning

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The Risk Map
Reputation Risk

Organisational Risk
Political fragmentation Climate
change Pandemics Global change Business
cycles Demographics Nuclear proliferation
Religious Fundamentalism

Operational
Country/Region
Organisational Risk
Financial/markets
Legal intangibles
External Risk
Political/regulatory
Strategic Risk
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Horizon Scanning in context
External Signals Futures Trends Internal Signa
ls Internal Futures
Scenarios or Forecasts
Implement- ation
Options
Decisions
Analysis
Synthesis
Horizon Scanning
Decision-making
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Scenarios

• Scenarios are
• an internally consistent view of what the future
  might be,
• not a forecast but one possible future outcome
• Professor Michael Porter, Harvard Business School

Forecasts Scenarios
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Definitions and questions

• A strategic risk
• Is one which threatens the organisation in
  potentially massive ways
• Horizon Scanning
• Provides advance warning to the organisation
• Scenario Planning
• Provides futures that real people can relate to
• Allows an organisation to move to decision and
  implementation
• Why is this difficult?
• Problems of urgent vs important
• Different types of thinkers

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Why it is difficult
Horizon Synthesis Analysis
Decision Implementation Scanning maker

Horizon scanner Scenarios Strategist
Corporate Line manager manager 843
trends Alternate Ideas Portfolio Early
indicators interconnected futures systems
management Timescales Planning
Decisions Resources
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Agenda

• What are
• Strategic Risk
• Horizon Scanning
• Scenarios
• Example a project for the City of London
• Horizon scanning
• Scenarios
• Analysis
• Decision makers
• Implementation
• 5 Questions to ask
• before starting on Scenario Planning or Horizon
  Scanning

SAMI Consulting 2006
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City of London project

• SAMI project to explore the impact of China and
  India on Financial Services in the City of London
• Used scenarios
• Developed by Oxford Analytica
• Three scenarios for China in 2015
• Three scenarios for India in 2015
• Workshops across the City
• Interviews with key players
• Report due this month

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Horizon scanning

• Sources
• Oxford Analytica reports, based on the daily
  brief
• Oxford Analytica network of academics
• Challenge Forum! Database
• Conferences, seminars, books, articles
• Deciding on relevance accuracy
• Dilemna is boil the ocean vs ignore weak
  signals
• How would it affect FS direct, indirect
• In what timescale would it have an effect
• Framework for analysis

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Framework for Horizon Scanning
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Scenarios

• First cut developed in a one day workshop
• Oxford Analtyica staff, experts, SAMI staff,
  experts
• Decide main drivers and axes of uncertainty
• Story line developed by a small team
• Evolution path for the three possible quadrants
• Critique within initial group
• Plausibility, coherence
• Pull out timelines, early indicators
• Decide on names
• Set in context of global trends
• Write executive summary

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Retreat to the Woods
Now
Three Scenarios for India in 2015
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Analysis

• What are the implications for the City of
  Londons Financial Services?
• Workshops for regulators, insurance industry,
  asset managers, retail banks, BoE, LSE, etc
• Use a mixture of presentation and group
  discussion both to allow participants to think
  through the implications and to allow us to
  capture their ideas.
• Global trends SWOT of City
• India scenarios implications
• China scenarios and implications
• Comparing China and India
• Over 60 people consulted

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Framework for analysis stage

• A report in the City of London series
• 120 page report
• Containing detailed scenarios
• Importantly recommendations
• Report to describe method rationale behind the
  recommendations
• Workshops designed to provide the recommendations
  in the report
• Cover the range of FS organisations in the city
• Engage in structured discussion
• Provide a stimulating event for participants

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Decision makers

• Report reaches all the decision makers in the
  City
• Conference planned to present results
• Core conclusion is that the balance of the world
  order is changing and that the key threat is
  complacency
• Some of recommendations cover some ways in which
  the City can create more ongoing relationships
  with Chinese and Indian decision makers
• City institutions
• Government bodies
• Universities
• Professional bodies

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Framework for decisions

• What types of decisions could be outcomes?
• Who are decision makers?
• Influencers, blockers
• What is decision process?
• Timescale, critical stages
• One organisation or many involved?
• Are there key protagonists
• eg role models, early adopters?
• How will you know when a decision has been made
• Who will do what?

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Implementation

• The City of London project is about
  implementation
• Through recommendations on opportunities, sectors
  and timescales are reasonably focused
• In other projects we have designed benchmarks or
  targets which led to implementation eg
• Affordable housing in Surrey new cross- county
  body
• Arts Marketing Association Arts Olympics
• Legal General create a Marketing Department
• Scenarios for Scotland change investment focus
  from MNCs to growing Scottish entrepreneurs

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Agenda

• What are
• Strategic Risk
• Horizon Scanning
• Scenario Planning
• Criteria for success
• Example a project for the City of London
• Horizon scanning
• Scenarios
• Analysis
• Decision makers
• Implementation
• 5 Questions to ask before commissioning a futures
  project

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5 questions to ask

• What implementation do you want as a result of
  the project?
• eg combating terrorism, higher of China and
  India FS trade
• Who are the decision makers? How to communicate
  to them?
• eg corporate managers, politicians reports,
  seminars ---
• How to explore the implications of the scenarios
• Stakeholders, contributors, brain power, decision
  makers---
• How to get away from standard thinking?
• Outsiders, remarkable people, young high flyers,
  competitors
• How to avoid boiling the ocean in horizon
  scanning
• Use of a framework methodology for
  prioritisation

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The end!

• www.samiconsulting.co.uk
• Robust decisions in uncertain times

SAMI Consulting 2006