DATE: Fri 24 Jun 2016
BY: Stephen Aldridge
So now we know.
Britain has voted to leave the European Union and we are facing an uncertain future.
But let’s not panic. We need to focus on adjusting to the new normal and look to the future and deal with it. Britain is good at adapting to changing circumstances and now we know the direction we will be taking, we should start looking for the opportunities that this presents.
Some companies will have been through a scenario planning exercise for the first time in preparation for a possible Brexit. Some routinely do this as part of their strategic planning as famously pioneered by Shell in the 1960s and taught on many MBA courses since. It is telling that Shell continues to do scenario planning today, albeit an evolution of the original concept. The objective is not to try to forecast the most likely scenario for the future, but to tell two or more plausible stories of what the future might hold. This thinking encourages managers to break away from the ‘business as usual’ mind-set and acts as a ‘temporary scaffold’ to support the strategic conversation.
Brexit is now a reality and any business that hasn’t already thought through a Brexit scenario will need to do so. Necessity is the mother of invention and, faced with our new situation, all manner of necessities will emerge and with them new opportunities to exploit. Clearly, these opportunities will have associated risks and uncertainties and those need to be weighed up before decisions can be taken.
In the Numeritas world of financial modelling, we like to encourage clients to think in terms of scenarios and not to fixate on single point forecasts. One thing is for sure, a single point forecast will inevitably be wrong. The power of a good model is not to provide an accurate forecast; it is not a crystal ball. Rather, it can help understand the robustness of a business case and answer questions about the impact of events.
So now that one major uncertainty has been resolved, we must embrace the host of other uncertainties that lie before us and be prepared for different versions of the future, using a robust, flexible model to forecast the outcomes.
Call us if you would like to explore how a robust forecasting model could help your business.
Information about Shell’s scenario planning is based on an article in Harvard Business Review in May 2013.
Download our Guide “Planning for a confident Brexit” to:
Stephen is a Chartered Management Accountant and has over ten years of financial modelling experience both at KPMG and Deloitte. His early career included engineering, sales and corporate management roles. In 2004, Stephen joined Numeritas as a co-owner and a Managing Director.
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