Threats and 'What If' Scenarios
Threats and ‘What If’ Scenarios
SECTION 1: UNDERSTANDING THREATS
- A threat in business is any situation or trend that can negatively impact a company’s performance or ability to achieve its goals.
- Threats can originate both internally and externally, and can include competitive pressures, changes in consumer behaviour, economic downturns, or legal regulations.
- Identifying threats is a fundamental part of strategic planning and risk management, helping businesses prepare and respond effectively.
SECTION 2: TYPES OF THREATS
- Competitive threats: Increased competition, new entrants, or rival products can threaten a company’s market share and profitability.
- Economic threats: Economic factors such as inflation, exchange rates, or recession can impact a company’s financial health and demand for its products/services.
- Technological threats: Rapidly changing technology or digital disruption can make a company’s products, services, or operations obsolete.
- Legal threats: New laws or regulations can threaten a company’s operations, especially if they lead to increased costs or restrict business activities.
- Environmental threats: Environmental factors such as natural disasters or climate change can disrupt operations or supply chains.
SECTION 3: ‘WHAT IF’ SCENARIOS
- ‘What if’ scenarios, also known as scenario planning or forecasting, involves creating detailed narratives about alternative future circumstances.
- Businesses use ‘what if’ scenarios to anticipate potential changes and identify how the business would perform under these different conditions.
- This allows businesses to pre-emptively develop strategies to mitigate risks, capitalise on opportunities, or adapt their business model for different future environments.
SECTION 4: PROCESS OF SCENARIO PLANNING
- Identify the main factors or trends that could impact the business.
- For each factor, outline several different plausible outcomes that represent variations in how that factor might change.
- For each possible future scenario, assess the impact on the business and how it would need to respond.
- Integrating this analysis into the strategic planning process gives businesses a more flexible, dynamic approach that better prepares them for uncertainty and change.
SECTION 5: BENEFITS OF ‘WHAT IF’ SCENARIOS
- Facilitates proactive rather than reactive decision making, as it allows businesses to plan for potential future events.
- Provides a deeper understanding of the potential risks and opportunities that could affect the business, helping guide long-term investments or strategic priorities.
- Encourages creativity and innovation by allowing businesses to explore different ways they could evolve in response to potential future changes.
- Strengthens the resilience of a business by equipping it with alternative strategies and plans for a range of scenarios.