Scenarioanalys

Scenarioanalys is a systematic method for exploring possible futures by constructing and examining multiple plausible scenarios. It aims to understand how different combinations of drivers and uncertainties can affect outcomes, rather than predicting a single exact result. The approach is widely used to inform strategic decision-making, risk management, and policy analysis.

Common domains include finance and risk management, corporate strategy, climate and environmental planning, and public policy. In finance, scenarioanalys supports stress testing and capital planning by evaluating how portfolios or institutions would perform under adverse or favorable conditions. In strategy, it helps organizations anticipate market shifts, technological changes, or regulatory developments.

The methodology typically involves identifying key drivers of uncertainty, defining a set of scenarios (often including a base, optimistic, and pessimistic case, or a broader scenario tree), and modeling relationships to estimate effects on relevant metrics such as revenue, costs, cash flow, or risk indicators. Analysts may combine qualitative narratives with quantitative estimates and conduct sensitivity analyses to determine which variables have the greatest impact.

Outputs from scenarioanalys include scenario narratives, quantitative impact assessments, risk indicators, and recommended actions or contingency plans. Limitations include reliance on assumptions, potential bias in scenario selection, and the challenge of assigning probabilities to hypothetical futures. Related concepts include scenario planning, stress testing, and risk analysis.