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Scenario Planning and Horizon Scanning for Strategic Risk Management. www.samiconsulting.co.uk Robust decisions in uncertain times. SAMI Consulting 2006. Agenda. Defining our terms Strategic Risk Horizon Scanning Scenarios Example – a project for the City of London: 5 stages

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scenario planning and horizon scanning for strategic risk management

Scenario Planning and Horizon Scanning for Strategic Risk Management

www.samiconsulting.co.uk

Robust decisions in uncertain times

SAMI Consulting 2006

agenda
Agenda
  • Defining our terms
    • Strategic Risk
    • Horizon Scanning
    • Scenarios
  • Example – a project for the City of London: 5 stages
    • Horizon scanning
    • Scenarios
    • Analysis
    • Decisions
    • Implementation
  • 5 Questions to ask
    • before starting on Scenario Planning or Horizon Scanning

SAMI Consulting 2006

the risk map
The Risk Map

Reputation Risk

Organisational Risk

Political fragmentation

Climate change Pandemics

Global change Business cycles

Demographics Nuclear proliferation

Religious Fundamentalism

Operational

Country/Region

Organisational

Risk

Financial/markets

Legal & intangibles

External Risk

Political/regulatory

Strategic Risk

SAMI Consulting 2006

horizon scanning in context
Horizon Scanning in context

External

Signals

Futures

Trends

Internal

Signals

Internal

Futures

Scenarios

or

Forecasts

Implement-

ation

Options

Decisions

Synthesis

Analysis

Horizon

Scanning

Decision-making

scenarios
Scenarios
  • Scenarios are
    • “an internally consistent view of what the future might be”,
    • “not a forecast but one possible future outcome”
    • Professor Michael Porter, Harvard Business School

Forecasts Scenarios

SAMI Consulting 2006

definitions and questions
Definitions – and questions
  • A strategic risk
    • Is one which threatens the organisation in potentially massive ways
  • Horizon Scanning
    • Provides advance warning to the organisation
  • Scenario Planning
    • Provides futures that “real people” can relate to
    • Allows an organisation to move to decision and implementation
  • Why is this difficult?
    • Problems of urgent vs important
    • Different types of thinkers

SAMI Consulting 2006

why it is difficult
Why it is difficult

Horizon Synthesis Analysis Decision Implementation

Scanning maker

Horizon scanner Scenarios Strategist Corporate Line manager

manager

“843” trends Alternate Ideas & Portfolio Early indicators

interconnected futures systems management Timescales

Planning Decisions Resources

SAMI Consulting 2006

agenda8
Agenda
  • What are
    • Strategic Risk
    • Horizon Scanning
    • Scenarios
  • Example – a project for the City of London
    • Horizon scanning
    • Scenarios
    • Analysis
    • Decision makers
    • Implementation
  • 5 Questions to ask
    • before starting on Scenario Planning or Horizon Scanning

SAMI Consulting 2006

city of london project
City of London project
  • SAMI project to explore the impact of China and India on Financial Services in the City of London
  • Used scenarios
    • Developed by Oxford Analytica
    • Three scenarios for China in 2015
    • Three scenarios for India in 2015
  • Workshops across the City
  • Interviews with key players
  • Report due this month

SAMI Consulting 2006

horizon scanning
Horizon scanning
  • Sources:
    • Oxford Analytica reports, based on the daily brief
    • Oxford Analytica network of academics
    • Challenge Forum! Database
    • Conferences, seminars, books, articles
  • Deciding on relevance & accuracy
    • Dilemna is “boil the ocean” vs ignore weak signals
    • How would it affect FS – direct, indirect
    • In what timescale would it have an effect
    • Framework for analysis

SAMI Consulting 2006

framework for horizon scanning
Framework for Horizon Scanning

SAMI Consulting 2006

scenarios12
Scenarios
  • First cut developed in a one day workshop
    • Oxford Analtyica staff, experts, SAMI staff, experts
    • Decide main drivers and axes of uncertainty
  • Story line developed by a small team
    • Evolution path for the three possible quadrants
  • Critique within initial group
    • Plausibility, coherence
  • Pull out timelines, early indicators
    • Decide on names
  • Set in context of global trends
  • Write executive summary

SAMI Consulting 2006

slide13

Centralised system of governance

The Elephant Breaks its Chains

Liberalisation is reversed

Liberalisation accelerates

The Elephant Lumbers along

Federal, subsidiary style of governance

Retreat to the Woods

Now

Three Scenarios for India in 2015

analysis
Analysis
  • What are the implications for the City of London’s Financial Services?
    • Workshops for regulators, insurance industry, asset managers, retail banks, BoE, LSE, etc
    • Use a mixture of presentation and group discussion – both to allow participants to think through the implications and to allow us to capture their ideas.
    • Global trends & SWOT of City
    • India scenarios & implications
    • China scenarios and implications
    • Comparing China and India
  • Over 60 people consulted

SAMI Consulting 2006

framework for analysis stage
Framework for analysis stage
  • A report in the City of London series
    • 120 page report
    • Containing detailed scenarios
    • Importantly recommendations
    • Report to describe method & rationale behind the recommendations
  • Workshops designed to provide the recommendations in the report
    • Cover the range of FS organisations in the city
    • Engage in structured discussion
    • Provide a stimulating event for participants

SAMI Consulting 2006

decision makers
Decision makers
  • Report reaches all the decision makers in the City
  • Conference planned to present results
    • Core conclusion is that the balance of the world order is changing and that the key threat is complacency
  • Some of recommendations cover some ways in which the City can create more ongoing relationships with Chinese and Indian decision makers
    • City institutions
    • Government bodies
    • Universities
    • Professional bodies

SAMI Consulting 2006

framework for decisions
Framework for decisions
  • What types of decisions could be outcomes?
  • Who are decision makers?
    • Influencers, blockers
  • What is decision process?
    • Timescale, critical stages
    • One organisation or many involved?
  • Are there key protagonists
    • eg role models, early adopters?
  • How will you know when a decision has been made
    • Who will do what?

SAMI Consulting 2006

implementation
Implementation
  • The City of London project is about implementation
    • Through recommendations on opportunities, sectors and timescales are reasonably focused
  • In other projects we have designed benchmarks or targets which led to implementation eg
    • Affordable housing in Surrey –new cross- county body
    • Arts Marketing Association – Arts Olympics
    • Legal & General – create a Marketing Department
    • Scenarios for Scotland – change investment focus from MNCs to growing Scottish entrepreneurs

SAMI Consulting 2006

agenda19
Agenda
  • What are
    • Strategic Risk
    • Horizon Scanning
    • Scenario Planning
  • Criteria for success
  • Example – a project for the City of London
    • Horizon scanning
    • Scenarios
    • Analysis
    • Decision makers
    • Implementation
  • 5 Questions to ask before commissioning a futures project

SAMI Consulting 2006

5 questions to ask
5 questions to ask
  • What implementation do you want as a result of the project?
    • eg combating terrorism, higher % of China and India FS trade
  • Who are the decision makers? How to communicate to them?
    • eg corporate managers, politicians: reports, seminars ---
  • How to explore the implications of the scenarios
    • Stakeholders, contributors, brain power, decision makers---
  • How to get away from standard thinking?
    • Outsiders, remarkable people, young high flyers, competitors
  • How to avoid boiling the ocean in horizon scanning
    • Use of a framework & methodology for prioritisation

SAMI Consulting 2006

the end

The end!

www.samiconsulting.co.uk

Robust decisions in uncertain times

SAMI Consulting 2006