Scenario-Based Risk Management

Our Newest Initiative: Scenario Methods for Risk Management

Our members are finding a scenario-based approach to risk management to be exceptionally relevant today. Particularly given the insights we are gaining on the expected impacts of the progressing energy transition...

In several 2023 CCRO meetings, we discussed the enormous market, technological and regulatory uncertainties facing the industry sectors in which our membership operates. Particularly given the context of energy transition and the Inflation Reduction Act. (see IRA discussion from CCRO meeting here) These uncertainties have far reaching implications for risk management practices in our organizations.

So, scenario planning is an essential tool designed to explicitly incorporate uncertainty into strategic decision making and risk management. Possessing insightful scenarios is essential to broadening thinking about the range of potential future outcomes and identifying potential strategic alternatives. Scenarios are particularly important in multi-stakeholder situations in that they enable stakeholders to have a shared understanding and a shared vocabulary for discussing the future.

During the members’ discussions at the July meeting (see recordings below/right), there were a number of issues that the members voiced their interest in pursuing through this working group. Among others, these included:

1. Build on the legacy frameworks already developed for scenario analysis.

2. Clarify why scenario planning is so different from stress testing.

3. Build a shared, best practice list of drivers for consideration.

4. Clarify Well Defined “Drivers” versus a “Story” That brings Plausibility

5. Publish Standard Scenario Terminology

6. Consider Organizational Best Practices

7. Develop a robust process for reducing the number of potential drivers.

If you’d like to be part of our on-going discussions and development of CCRO materials for scenario planning - let us know!

Catch Up With Our Short Videos from The July ‘23 Discussion

Hosted by Advocate member Chris Dann of Publicis Sapient, our first deep dive explored the origins of scenario planning, the process for developing actionable scenarios, and potential best practices for scenario analysis. For anyone that would like to be a part of this group, our session was recorded. See below, we offer the discussion consolidated into eight short video clips to help you get motivated to join us in this initiative: