The last few years have been a rollercoaster ride for many businesses, with a variety of challenges to navigate. This being said, some businesses and some sectors have fared better than others, and part of this comes down to the nature of financial planning in a crisis.
Each business has a worst-case scenario that is often subtly different from other businesses, even within the same sector. The key to successful business crisis planning is to recognise your worst-case scenario and plan for it effectively, so you can identify the early warning signs and adapt accordingly.
Preparing for your worst-case scenario involves moving beyond a single, central view of the future. As the economy is dynamic, rather than static, financial planning should anticipate a variety of internal and external risks and their potential impact on your business. A worst-case scenario usually involves a crisis instigated by multiple pressure points simultaneously, which risks pushing the organisation towards financial collapse. Mapping out a credible worst-case scenario will help you identify your boundaries of financial sustainability, and help you develop the structures and practices to mitigate or avert a crisis.
Some external factors have an effect on all businesses, such as inflation, taxation, asset prices, cyber security risks, interest rates, and so on, and these are largely outside of your direct control. However, each factor will affect individual businesses in different ways. There are numerous internal factors that could precipitate a crisis, such as manufacturing costs, supply chain issues, stock levels, technological changes, commodity prices, or skills shortages.
A Credible Worst-Case Scenario Is a combination of external and internal factors that could credibly trigger your worst-case scenario. As there are multiple variables at play here, this type of financial modelling is difficult to do with spreadsheets. Using financial planning software for business, however, your team can run scenarios using different combinations of factors and measure the likely financial impact of various input parameters and interconnected effects. The results can then be analysed and compared with other scenarios. With a modern platform, this scenario mapping can be performed in minutes or hours, rather than days or weeks.
The purpose of credible worst-case scenario planning is to identify and quantify the effect of the risks that threaten business continuity and develop contingent and mitigating actions. An FP&A software platform, such as Corporate Planner, can help you run multiple scenarios for individual departments and your whole business, giving you a wider range of strategic choices to identify and avert a worst-case scenario crisis.
The platform will also help you manage and avoid risks associated with product launches, restructuring, and other positive organisation-wide changes, helping you not only navigate uncertainty but also leverage emerging market opportunities with greater confidence.
Get in touch with Account-Ability today to find out more about business crisis planning, and how an advanced forecasting software platform can help you plan for business continuity.
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