What is scenario analysis？
- Owner
- May 11, 2022
- 1 min read
A scenario describes a path of development leading to a particular outcome. Scenarios are not intended to represent a full description of the future, but to highlight central elements of a possible future and to draw attention to the key factors that will drive future developments. In other words, scenarios are hypothetical constructs; they are neither forecasts nor predictions; nor are they sensitivity analyses.
Scenario analysis is a tool to inform and enhance critical strategic thinking. A key feature of the scenarios chosen to be modelled is that they should challenge conventional wisdom about the future. In a world of uncertainty, scenarios are intended to explore alternative outcomes that may alter the basis for “business-as-usual” assumptions.
Scenario analysis is also iterative and dynamic, rather than static, and needs to be refreshed or updated, in line with evolving expectations regarding the future. For example, scientific and economic data underpinning scenario analysis is continually evolving, and scenarios should be updated to reflect this, to ensure they remain high-quality and relevant to decision-making.
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