AFM203 Lecture Notes - Lecture 4: Scenario Planning, Strategic Planning, Contingency Plan

• School: University of Waterloo
• Department: Accounting & Financial Management
• Course: AFM203
• Professor: Bruce Wolff

Document Summary

Scenario planning is used as a tool to effectively deal with uncertainty and risk in many uncertainties. What is a scenario: cohesive set of assumptions that describes a view of the future that is then used to develop a forecast or test a strategy, plan or decision. Relevance of scenario planning: uncertainty, volatility, and unpredictability have come to characterize the environment in which most organizations now operate. Strategic planning process: 3-5 year forecasts: budgeting. Why or why not: no communicating different views of the future would be confusing when trying to establish a common corporate strategy, used as a management tool to understand risk & prepare for the unexpected. Quantifying uncertainty: once a risk is identified, senior management team will often require an understanding of the financial impact if the risk occurred, analysts typically assesses against a budget/forecast. Identify likelihood & impact: quantify risk, mitigation plan. Key drivers for sale of homes: external drivers.