Scenario-Based Analysis & Modeling

Scenarios are not simply a set of nice stories; nor can they be used only within the context of a large-scale enterprise strategy engagement. Our sets of scenarios can be used to stress-test or analyze the implications of any critical decision facing you. And a set can be used to gauge the full plausible variability of any quantity of interest, as well as the interactions between various quantities.

Problem: A global manufacturer of automobiles faced turbulence and uncertainty in its most important South American market. It saw a huge potential for growth – along with major risks related to price instability, currency exposure, labor unrest, and a collapse in demand. There seemed no way to see where this market was headed.

Solution: We were called in to provide an independent perspective on the country and the market. We developed four scenarios, taking into account the full range of political, economic, and financial uncertainties. We built a regression-based market estimation model that led to demand implications of each scenario; total vehicle sales going out to five years; and sensitivity analysis around the potential impacts of specific exogenous shocks. The client used this work to make decisions on capacity, product mix, and distribution, and to prepare for the opening of its market to foreign competition.

 

Problem: Business continuity gaps for a major investment bank were exposed by the September 11th terror attacks. The firm had no choice but to rectify the problems in a credible manner, not knowing where the next disruption might come from.

 

Solution: A client-consultant team conducted an extensive survey of risks and exposures in facilities locations, business partners, technology, and personnel. Shortfalls were identified in states of readiness in targeted areas. We organized workshops in London and New York to challenge client business continuity planning and assumptions. We developed scenarios to ensure creative and rigorous thinking about future business environments – and unfamiliar risks, including extreme weather. The work resulted in a set of “must do” actions that could be accomplished at reasonable cost, and shed light on costs and trade-offs associated with more complex and far-reaching decisions regarding facilities locations and business relationships.