How we scenario planned our way through COVID uncertainty

Scenario planning is a strategic planning system that can be used by businesses, large and small, to make flexible long-term plans. It is derived from methods used by military intelligence and uses multiple hypothetical future events or circumstances to inform your decisions. For a rapidly evolving event like the COVID pandemic, with so many unknowns and uncertainties, scenario planning for our business became a vital and very valuable tool, writes Thomas McClung who is the co-founder and Director of Dorado Property.

Scenario planning follows six stages to first understand the current environment and where the business sits within it, then discover which key factors influence the best and worst outcomes of the scenario at hand, and finally build a picture of what the world could look like over the next few years to respond in the best way possible.

The six stages of scenario planning

1.Company analysis

The first step is to break down what values the company stands for, its leadership mechanisms, and the virtuous circle that allows it to operate and grow. This stays the same over time and should guide any company reactions.

2. Situation analysis

From there, especially with an event like the pandemic, it’s vital to scan news updates, industry/government reports, and anecdotal evidence to build a picture of what is happening politically, socially, and economically. This step was critical for our business, as our diverse loan options operate across state borders and faced different threats, so staying on top of major developments was critical from the get-go.

3. Polar axis outcomes

To solidify this vision, we develop polar outcomes and choose the two factors that have the highest impact on the situation. During COVID-19, those factors were health and economy.

4. End states

With these factors as our axes, we create a matrix with four possible end states, projected out over several years. We named ours to reflect what we thought might happen.

The Lucky Country: Australia experiences the best-case outcome on both pandemic and economic fronts.
The Corona Bus: COVID-19 has extremely harsh health outcomes, but largely avoids economic issues by controlling outbreaks effectively.
The House of Cards: Australia controls COVID-19 quickly, but is hard hit economically as a result of exposing existing fragility.
The COVID Winter: Australia experiences the worst case scenario on both health and economic outcomes.

5. Implications

To gain some foresight into which end state we are entering, we develop best and worst-case outcomes in each, creating a complex and interconnected network of factors that are continually tracked. The longer a company spends at this stage, the more nuanced and accurate this network becomes.

6. Responses

While it’s difficult to predict which end state we will end up in, and realistically the real-world situation will shift between them, scenario planning allows us to develop responses to all possibilities in advance.

In our case staff became the backbone of our pandemic response. With so much information surrounding COVID-19 from conflicting sources, judging credibility became a team effort. Dividing topics between a core team enabled each to develop a deep understanding of credible information in one area that none of us would have gained individually, and react much faster to rapid developments.

Once we developed our end states, this shared sensemaking was expanded by getting the entire team and key consultants involved to bring them to life, lending a huge variety of perspectives and priorities to the vision during intensive workshops. The benefits of this approach go beyond developing more rounded end-states; team members reported higher confidence in our businesses’ longevity through the pandemic and substantially less fear and uncertainty around COVID-19.

How scenario planning helped our business

While many businesses paused operations, scenario planning revealed to us that each end state held interesting opportunities. As competitors pulled back, we increased our deal flow significantly by catching projects left without funding, developing valuable new industry relationships in the process. Internally, this materialised in developing three new staff roles to manage internal processes and increase deal flow into new areas, increasing scrutiny of COVID-19’s effects within our markets and investments.

What we learnt from scenario planning

To really take advantage of COVID-19’s opportunities and avoid its threats, we recognised the need to run a tighter ship. This extended from financial considerations including increased scrutiny of cash reserves, to overhauling processes with the help of an external consultant and a new internal role

Finally, and most crucially, scenario planning resulted in staff wellbeing becoming more of a focus, with individual wellbeing budgets allocated to improve physical and mental health. While scenario planning can initially feel like a daunting undertaking, the outcomes and process, can be invaluable in helping to maintain focus and to enable any organisation to be much more agile within our rapidly changing COVID world.

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