·       https://hmpi.org/2017/09/08/scenario-planning-tools-for-organizations-struggling-with-healthcare-reform-uncertainty-the-case-of-oscar-health-insurance/

Scenario Planning versus Forecasting

Scenario planning as explained by Saulsgiver (2018) is defined as “The process of visualizing what future conditions or events are probable, what their consequences or effects would be like, and how to respond to, or benefit from them.” So, scenario planning is to consider historical events as well as current situations in order to see future probable. An example for a scenario as given by Schultz Financial Group is their research on “what would be the economic implications if the United States government defaulted on their debt as government debt grows globally? Though the U.S has never been defaulted on its debt, this is to indicate that the risk of this event grows larger as the debt moves higher globally. The financial group suggested a possible solution that the US need to consider escaping of such risks: That is to print its own money and deflating the U.S dollar. The asset of using scenario planning is its mix methodologies which are qualitative (geopolitical tensions, fiscal policy, etc.) and quantitative (unemployment rate, GDP, etc.) viewpoints to approaching risk management. This helps to view a situation as a top-down/bottom-up approach while observing forward at the future and looking how a proposal might interact with a certain market situation. This makes scenario planning so much more flexible than traditional forecasting methods (Saulsgiver,2018). Although its flexibility, the drawback is that it needs resource and time management to analyze a series of scenarios (Deal, 2019). The process consumes more time, planning, and resources to make sure every aspect is addressed in the planning phase.  

Traditional forecasting, on the hand, is looking at where one is currently leveraging historical observations to estimate the best-case scenario in the future (Deal, 2019). Usually traditional forecasting utilizes historical quantitative methods (Saulsgiver,2018). Such methods predict happenings in the future depending on data from the past and present which makes it very rigid risk management assessment. Models built in this perspective frequently fail to predict a fast and significant changes in market fluctuations. The forecast needs to be articulated in proper values and in time periods which are suitable to the exercise. Values needs to usually be inflation free, like numbers of products, tones or gallons, monetary values as current prices, etc. (Hague, n.d). One of the advantages of using traditional forecasting is its ability of using of percentages (Saulsgiver,2018).  More information collected over time provides an organization to utilize percentage rates to make decisions based on possible outcomes as driven from data. Its disadvantage comes from its rigidity that makes hard to handle business fluctuations.  

 

References:

• Saulsgiver, M., (2018).  Scenario Planning versus Forecasting. https://sfginc.com/scenario-planning-versus-forecasting/
• Deal, J., (2019). Scenario Planning Vs. Traditional Forecasting.   (https://www.n6networks.com/single-post/2019/02/04/scenario-planning-vs-traditional-forecasting).
• Hague, P. (n.d).Forecasting & Scenario Planning (https://www.b2binternational.com/publications/forecasting-scenario-planning/).