Preparing for different outcomes.
WHAT A SCENARIO IS
A coherent set of assumptions about the future.
WHY USE THEM
A single forecast gives false confidence.
WHAT TO BUILD
Three: expected, better, and worse.
WHAT TO VARY
The things that genuinely could differ: sales volume, prices, key costs, a major customer.
WHAT TO CALCULATE FOR EACH
Revenue Profit Cash position Whether you could meet commitments
THAT LAST QUESTION
The important one.
WHAT THE WORSE CASE SHOULD BE
Plausible, not catastrophic.
A realistic bad outcome, not the end of the world.
WHAT TO DECIDE IN ADVANCE
What you would do in the worse case.
WHY IN ADVANCE
Decisions made under pressure are worse.
WHAT TO IDENTIFY
The point at which you would act, and what the trigger is.
WHAT TO REVIEW
Which scenario is actually unfolding, monthly.
WHAT TO KEEP
The scenarios, updated quarterly.
