The Art and Science of Scenario Planning | Accelerate Success with Lorraine Moore

Scenario planning is an important exercise for boards. An effective strategic plan is grounded in thoughtful assumptions and analysis. Management teams rely on a 3 to 5-year plan from which to create their annual plans. However, for boards, the crystal ball has not been so cloudy in many years and remote and virtual planning sessions lack the energy and creativity of in-person sessions. How are boards navigating this rocky shoreline?

Start with what you know for sure.

While we cannot be certain about everything, there are common elements and certainties that, as directors, we can agree upon. Independent of changing severity of lockdowns, availability of vaccines, global trade and outcomes of elections and political decisions, some things are certain.

Consumers will continue to purchase essential goods and services – food, healthcare, pharmaceuticals and beauty products, clothing and shoes (albeit perhaps in smaller volumes), home heating and cooling, and fuel and/or electricity for their vehicles.

Retail stores, restaurants, hotels, movie theatres and the arts (museums, theatres) will experience a prolonged depression in revenues. It is estimated that as many as 60% of restaurants will not survive.

In North America, occupancy in commercial buildings will not return to 2019 levels. While many will return to work in 2021 and beyond, many will not. Companies have and will continue to invest in technology to support remote work. Cost savings from leases and ownership will be appealing to shareholders and in many cases, required to offset a decline in revenues. In Europe, denser living conditions will likely contribute to fewer remote workers and greater use of commercial real estate.

Taxes will increase across the world as every country addresses its massive deficits. Increases in individual taxes will reduce buyers’ wallets. Corporate taxes will put a strain on the cost of goods and services.

E-commerce has exploded and will not diminish to 2019 levels. This provides new opportunities for technology providers and retailers.

Technology workers will maintain their positive and plentiful employment opportunities.

Growth in the US stock market has contributed to increased wealth. Demographics will result in trillions of dollars flowing to baby boomers and their children over the next two decades. This provides tremendous opportunities for financial services, investment banks and the travel industry – when healthy individuals in their 50s through 80s are able to get back on the road.

Children will return to organized sports. College and university athletics will regain their popularity and importance. Professional sports teams will return to stadiums and arenas.

Private schools, tutoring services and alternative educational offerings will be more attractive for the foreseeable future.

Low interest rates will support inexpensive capital. This will incent private equity and others with cash holdings to acquire available businesses. We will see the consolidation of companies.

As you consider the potential scenarios for your company, start by identifying all the factors for which there is some level of certainty.

It may be an opportune time for you to consider acquiring competitors or expanding into new markets. For technology businesses, the opportunity could be significant and the ability to execute will set you apart. There will be considerable turmoil and business closures through 2021. Closing or selling the business may be the best choice for your company; particularly when the cost of capital is low. The world will “return.” It will look different. There will be winners and losers. Plan to the best of your ability so that management can develop the most realistic operational plans.

During these challenging times, we need each other. Reach out to discuss how I may support your success. Contact me today.