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Scenario planning can help businesses alleviate uncertainty

Photographer: Armand Hough/African News Agency(ANA)

Photographer: Armand Hough/African News Agency(ANA)

Published May 22, 2020

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CAPE TOWN - The Coronavirus pandemic has had a tremendous impact on business, and as a result, it has created significant uncertainty about what lies ahead. This ‘unknown’ is crippling business leaders from making decisions or taking strategic action.

According to Sandra Beswick, Director at Financial and Strategic Advisory Firm Fluence Capital, taking action and planning in the midst of the crisis, is vital for survival.

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“Businesses need to shift out of their ‘survival mode’ mindsets and start to lay the foundations for longer-term recovery. While businesses have seen their revenues drop dramatically almost overnight, the worst thing leaders can do is panic and make ‘knee-jerk’ decisions,” said Beswick.

“This crisis has highlighted the need for more future-focused thinking, and while the unprecedented circumstances make it difficult to prepare, having a plan for various potential scenarios helps businesses to create strong future-proof strategies, and ensure longevity," she added.

Beswick says scenario planning can help businesses alleviate some of the uncertainty by enabling them to evaluate the potential impacts of certain outcomes, as well as envision possibilities on the other side of the crisis.

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To help navigate this uncertainty and constant change, Beswick defines three possible scenarios that enable business leaders to explore a broad range of potential futures ;

1. Worst-case scenario

The crisis continues for much longer than anticipated, leading to unprecedented economic collapse and difficulties for hundreds of businesses across all industries. This scenario is referred to by experts as an

, and is considered to be the best-case scenario as this sort of downturn begins with a sharp fall, but then bottoms out and economic recovery quickly follows.

While the recovery of individual businesses will largely depend on a variety of micro and macro factors, including the pre-coronavirus health of the business and the condition of their specific industry after the pandemic, it is vital for businesses to try predict which way their business could go in this crisis under the different scenarios.

From conducting a health check of the business, to cutting overhead expenses, and careful analysis of working cash flow, there are a range of tasks that can be carried out to help plan for recovery. Businesses must prioritise liquidity and cash flow as well as communicate clearly with all internal and external stakeholders if they are to see some light at the end of the tunnel.

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