Even the Best Laid Plans: Scenario Planning in a Downturn
Manufacturers Alliance/MAPI recently surveyed several of our senior executive members to find out how their scenario planning processes have helped them navigate the current downturn. What's the bottom line? While most members feel it's been a helpful tool, it hasn't been a silver bullet.
In fact, nearly 90% of respondents have had to revise their "Worst Case Scenario" downward because it wasn't bearish enough. According to one GM of a large, global industrial: “The general economic outlook and our specific market conditions continued to deteriorate during our budgeting process. We did a worst case downturn scenario in August 2008, and then revised it twice, and revised our budget four times from August 2008 to January 2009.”
What best practices did members share? Examples include: regularly updating scenarios based on new market data, gathering cross-functional input, developing scenarios with multiple time horizons, and not expecting the process to predict the future.
In fact, nearly 90% of respondents have had to revise their "Worst Case Scenario" downward because it wasn't bearish enough. According to one GM of a large, global industrial: “The general economic outlook and our specific market conditions continued to deteriorate during our budgeting process. We did a worst case downturn scenario in August 2008, and then revised it twice, and revised our budget four times from August 2008 to January 2009.”
What best practices did members share? Examples include: regularly updating scenarios based on new market data, gathering cross-functional input, developing scenarios with multiple time horizons, and not expecting the process to predict the future.
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