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How can businesses plan ahead when they feel that tomorrow may look like today? This is an issue where business leaders hang in the boardroom as they work with a barrage of challenges, from AI disruptions and geopolitical tensions to tariffs and financial market fluctuations driven by how the US president is being induced on social media. The sense of heightened uncertainty is obvious.
While US airline companies have withdrawn their year-round financial guidance, automaker Ford has stopped forecasting the outlook, citing “substantial industry risks.” From Unilever to HSBC, businesses must provide explicit warnings about unpredictable policies and uncertainties about interest rates and consumer trust.
It is no wonder that in this climate the tools used to test corporate strategies are being scrutinized. For decades, scenario planning has helped organizations map different futures based on variables such as economic change, technological leap, and regulatory changes. Scenario plans pioneered in Shell, which had anticipated the 1973 oil shock, have been a staple for companies ever since.
But as boxer Mike Tyson famously said, “Everyone is planning until they punch their faces,” or, as the chairman of one UK board told me, “One scenario where everyone seems to forget to plan is all the scenarios wrong.”
The degree of uncertainty today may seem familiar to executives reaching for executive playbooks. But now the situation is undoubtedly more complicated and risks are evolving every day. It’s not just the whiplash of the Trump administration’s policy changes and the swift reversal.
Even if some transactions are secured to ease trade tensions, a new corporate environment is emerging as a globalization that has supported growth over the past 40 years is threatened by more merchantarian forces.
I feel that technological advances that allow information to flow quickly through timelines and regions are nearing, amplified and overwhelming throughout the world.
“This time it’s quantitatively and qualitatively different,” argues Martin Reeves, a think tank at BCG. The crisis is multifaceted, increasingly political, and “there is a continuous uncertainty. In recent years, we’ve only seen one after another.”
It is common among business leaders that they are in standby mode. However, if you wait too long, the company loses momentum, loses innovation, and falls into a state of decision. If you act quickly, companies may make expensive choices that require backtracking.
Dahlia Crivonos, CEO of the Copenhagen Futures Institute, says that most companies at the highest levels have a high level of “hopeful thinking.” “Everyone is looking for certainty and wants to land on one model for the future,” she says.
Rather than identifying standard best cases, worst cases and basic scenarios, Krivonos adds that you should consider micro-scenarios directly related to your business and stress-test each assumption individually.
However, planning the scenario was not about predicting the future. It’s about training for that. There is a clear advantage to asking, “What?” David Niles, the Chief Executive Strategic Advisor, told his clients, “It’s not about getting the predictions right — it’s about preparing a series of plays, so when something unexpected happens, you’re not frozen.”
Imagine alternative futures, but another thing to know when to shift the course. In the short term, leaders need to buy time.
Simon Freakley of Alixpartners, a management consulting firm, recommends moves to secure supply chain, operations, cash sources, liquidity and work capital scrutiny, refinement of pricing and forecasts, focusing on top customers and segments, and alerting of risks such as cybersecurity.
Beyond these immediate steps, businesses need to think hard about their organization’s capabilities to find strengths. One Chief Financial Officer recently said, “In this environment, it’s easier to identify risks than to see opportunities.” If a company focuses solely on negative side protection, it could miss the benefits in a moment of disruption.
The goal of scenario planning is not just to survive crises one after another. It also means becoming an organization that can adapt and grow even when it is around the corner.
anjli.raval@ft.com
