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Use of scenarios in strategic and political risk analyses

Use of scenarios in strategic and political risk analyses Over the next 10 to 15 years, the international system (and corporations) will have to adjust to changing power relationships in key regions. These have the potential to provide discontinuities greater in impact than the end of the Cold War. Numerous crises have already surprised economists, ratings agencies, governments and strategic planners alike. Use of scenario analysis is particularly useful in circumstances where it is necessary to take a long‐term view of strategy, and where there is a high level of uncertainty about external influences. One of the principal problems however, is that not enough attention is paid to potential political risk discontinuities with the organization deprived of critical intelligence about the external environment. Building in the flexibility to strategic thinking to understand the possibilities and risks offered by a range of futures is the key to success, if the modern corporate is to be in the best possible state of preparedness for the years ahead. A China case study demonstrates that opposite scenarios for the future are equally plausible, while the history of hegemonic predictions is deeply flawed. Part of the problem being that decision making, whether in the State or strategy department may not be “rational.” The Saudi Arabia case study offers scenarios with global implications. There is no crystal ball that enables analysts to predict future aspects of international relations with certainty, but the aim of scenario analysis is not to be occasionally right about the future, as never to be wrong. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png Handbook of Business Strategy Emerald Publishing

Use of scenarios in strategic and political risk analyses

Franc Milburn
Handbook of Business Strategy , Volume 6 (1): 6 – Dec 1, 2005
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Publisher
Emerald Publishing
Copyright
Copyright © 2005 Emerald Group Publishing Limited. All rights reserved.
ISSN
1077-5730
DOI
10.1108/08944310510556919
Publisher site
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Abstract

Over the next 10 to 15 years, the international system (and corporations) will have to adjust to changing power relationships in key regions. These have the potential to provide discontinuities greater in impact than the end of the Cold War. Numerous crises have already surprised economists, ratings agencies, governments and strategic planners alike. Use of scenario analysis is particularly useful in circumstances where it is necessary to take a long‐term view of strategy, and where there is a high level of uncertainty about external influences. One of the principal problems however, is that not enough attention is paid to potential political risk discontinuities with the organization deprived of critical intelligence about the external environment. Building in the flexibility to strategic thinking to understand the possibilities and risks offered by a range of futures is the key to success, if the modern corporate is to be in the best possible state of preparedness for the years ahead. A China case study demonstrates that opposite scenarios for the future are equally plausible, while the history of hegemonic predictions is deeply flawed. Part of the problem being that decision making, whether in the State or strategy department may not be “rational.” The Saudi Arabia case study offers scenarios with global implications. There is no crystal ball that enables analysts to predict future aspects of international relations with certainty, but the aim of scenario analysis is not to be occasionally right about the future, as never to be wrong.

Journal

Handbook of Business Strategy – Emerald Publishing

Published: Dec 1, 2005

Keywords: Corporate strategy; Risk management; Uncertainty management

References

  • Storm Command
    de la Billière, P.
  • Exploring Corporate Strategy, Texts and Cases
    Johnson, G.; Scholes, K.
  • Dragon on Terrorism: Assessing China’s Tactical Gains and Strategic Losses Post 9‐11
    Malik, M.
  • It Doesn’t Take a Hero
    Schwarzkopf, H.N.