We recently came across an article from Gartner that piqued our interest and reaffirmed a lot of how we think about scenario planning here at Apliqo. It mentioned a study that they did showing that 53% of CFOs want to adjust their financial scenario planning in the face of the US changing its trade policy. Of course, this is highly topical as the current administration is affecting significant changes to global tariffs that impact key supply chains in many industries, but this is not an isolated or once-off event. In modern business, there are always big changes happening that can render static scenario planning moot in no time at all.

The reality is that if you want scenario planning that is useful and that is actually responsive to reality on the ground, it needs to be agile, and it needs to be built on a foundation of driver-based planning. This is something we’ve written a lot about, and it’s something that we continue to encourage in all of our clients. So, we thought we’d use this article to talk about it again and discuss some of the key practical action steps that Gartner suggests in their article.

Strategy 1: Streamline financial scenario prioritisation frameworks

Gartner emphasises the importance of creating efficient processes that allow FP&A teams to properly delineate work and prioritise stakeholder requests. They suggest adopting rolling forecasts, shorter planning cycles, and pre-established scenario rules, along with creating scenario catalogues to avoid duplication and reuse past work.

This recommendation strikes at the heart of a common problem we see across organisations: scenario planning becomes an exercise in satisfying every possible "what if" request rather than focusing on scenarios that genuinely drive strategic decision-making. The key insight here isn't just about efficiency – it's about creating a disciplined approach to scenario development that maintains relevance whilst avoiding analysis paralysis.

Furthermore, the shift towards shorter planning cycles isn't just about speed – it's about acknowledging that in volatile environments, the half-life of planning assumptions has shortened dramatically. Rolling forecasts tied to driver-based models allow organisations to maintain strategic direction whilst adapting tactical responses as conditions evolve.

Strategy 2: Build driver-based models

Gartner advocates for creating financial scenario forecasting models that structure work around the main drivers of business performance, focusing on variables with the most impact rather than forecasting every line item. They note this speeds up scenario analyses and gives FP&A teams time to make quick decisions.

This recommendation aligns perfectly with what we consider the foundation of effective scenario planning. However, the challenge isn't just identifying the key drivers – it's building models that can dynamically weight these drivers based on changing business conditions. Traditional driver-based models often assume static relationships between drivers and outcomes, but in reality, these relationships shift based on external conditions.

The most sophisticated organisations understand which drivers matter most, and how their relative importance changes under different scenarios. For instance, customer acquisition costs might be the primary driver in a growth scenario, but customer retention rates become more critical in an economic downturn.

Additionally, effective driver-based models need to account for interaction effects between drivers. It's rarely the case that drivers operate independently – changes in one area often amplify or dampen the impact of changes in another. Building models that capture these interdependencies is crucial for generating realistic scenarios rather than overly optimistic or pessimistic projections based on isolated assumptions. 

Strategy 3: Take advantage of scenario planning technology

The Gartner article highlights using technology to support and streamline scenario planning processes, including AI scenario planning models to track key metrics in real-time and auto-generate scenarios based on real data rather than guesses.

Whilst we absolutely agree with leveraging technology, there's a critical distinction between automation and intelligence that organisations must navigate carefully. The promise of AI-generated scenarios is compelling, but the reality is that artificial intelligence excels at pattern recognition within existing data sets – it's less effective at anticipating truly novel scenarios or black swan events that haven't occurred in the historical data.

The most effective approach combines the computational power of AI with human insight about potential discontinuities in business patterns. AI can rapidly generate multiple scenarios based on historical correlations and current trends, but human expertise is essential for stress-testing these scenarios against potential game-changing events or shifts in market dynamics.

The key is implementing technology that augments human decision-making rather than replacing it, creating systems that can rapidly process large amounts of data whilst preserving the strategic context and business intuition that makes scenario planning genuinely useful.

Strategy 4: Create contingency plans for your scenarios

Gartner suggests that CFOs should develop actions for each potential scenario that allow organisations to respond quickly, including thinking about actions that could apply to multiple scenarios. They frame this as both risk mitigation and opportunity identification.

This recommendation touches on what we consider the ultimate test of scenario planning effectiveness: can your scenarios actually inform decision-making, or are they merely academic exercises? The most valuable scenario planning processes create clear decision trees that link specific trigger events to predetermined actions.

However, the real sophistication lies in developing contingency plans that are both specific enough to be actionable and flexible enough to adapt to the messy reality of how scenarios actually unfold. Pure scenarios rarely materialise exactly as modelled – reality typically combines elements from multiple scenarios or introduces variables that weren't initially considered.

The most effective contingency planning we've observed involves identifying decision points rather than predetermined outcomes. This means establishing clear criteria for when to pivot from one strategic approach to another, along with the organisational capabilities needed to execute these pivots successfully. It's not enough to know what you'd do in different scenarios – you need to ensure your organisation can actually execute these responses when required.

Strategy 5: Use scenarios to build investor confidence

The final recommendation focuses on using financial scenario planning as a communication tool in investor meetings and earnings calls, striking a balance between demonstrating preparedness without appearing indecisive.

This strategic use of scenario planning reflects a mature understanding of how financial markets actually function. Investors aren't just evaluating current performance – they're assessing management's ability to navigate uncertainty and respond to changing conditions. Thoughtful scenario communication demonstrates strategic thinking whilst managing expectations about potential outcomes.

However, the communication challenge extends beyond simply choosing the right number of scenarios to share. The most effective investor communication uses scenarios to tell a coherent story about how management thinks about the business, what they're monitoring, and how they make decisions under uncertainty.

The key insight here is that scenario planning for external communication should be consistent with internal decision-making processes. Investors can typically distinguish between genuine strategic thinking and scenarios created purely for external consumption. The most credible approach involves sharing the actual frameworks and thinking processes that guide internal decisions, adapted appropriately for external audiences.

From planning to competitive advantage

Gartner's five strategies collectively point towards a fundamental shift in how organisations approach financial planning. The days of annual planning cycles based on single-point forecasts are giving way to continuous, scenario-based approaches that treat uncertainty as a strategic asset rather than a planning obstacle.

The organisations that will thrive in volatile environments are those that can rapidly sense changes in their operating environment, quickly assess implications across multiple scenarios, and decisively implement responses whilst maintaining strategic coherence. This requires not just better planning processes, but fundamental changes in organisational capabilities and mindsets.

At Apliqo, we've seen firsthand how the right combination of technology foundation, planning methodology, and organisational discipline can transform scenario planning from a compliance exercise into a genuine source of competitive advantage. If you’d like to explore what that looks like for your business, be sure to get in touch today.