How scenario planning can transform your financial strategy
Will China invade Taiwan? And if so, when?
For the world’s largest multinational companies with operations in Asia or supply chains depending on Taiwan, this is a pressing question. Any disruption to the status quo could severely affect their business operations.
Even though it may seem like a distant concern, businesses need to know now what plans to have in place to protect their people, assets, and supply chains.
The challenge is that it’s unclear what such an invasion might look like or what the full impact could be on businesses.
Would it result in full-blown war or something less severe? Could there be a blockade of the island, or might Taiwan-bound ships face harassment? Or perhaps, we may see a continuation of the status quo, with increased hostility from China toward Taiwan and businesses operating there.
To prepare, multinational companies often develop a series of scenarios outlining how events could unfold and the potential implications for their organisations.
These scenarios vary but are always realistic (otherwise, what’s the point?). They provide a detailed picture of possible outcomes, helping senior executives fully understand complex events, leading to meaningful discussions about how to respond and prepare.
When your company faces major financial decisions, going through a similar process can be invaluable.
Take a client of ours who had a large building in London that was once central to their operations but had since become a burden.
Should they sell it? The answer wasn’t simple.
The building had a dilapidations issue, meaning they’d need to invest up to £1 million to restore it before being able to vacate it. Downsizing also carried other financial implications. Where would they operate from instead? What facilities would they need if their team worked remotely?
Keeping the building posed its own challenges. It was expensive to run, especially as it was now half-empty. Moreover, the company’s business model had evolved over the last decade, and the space was no longer fit for purpose. What adjustments would be necessary to stay, and at what cost?
They could have debated these issues endlessly in the abstract – and they did.
But we worked with them to focus their thoughts through a scenario planning and forecasting process. We mapped out precisely what it would look like if they kept the building for a specific period versus if they moved.
The scenarios clearly laid out the changes required in each case, and critically, they showed the financial implications in real terms, with actual numbers, giving them a precise understanding of the impact on their bottom line.
Armed with these scenarios, they were far better equipped to assess their options and make decisions based on informed data rather than gut instinct.
Whenever you face significant financial decisions, a similar approach can help.
You need a deep understanding of what different options mean financially. We can work with you to ensure you’re making these decisions based on real data and figures, and where relevant, scenarios. (You may be smaller than a corporate, but we believe you deserve the same attention and tools!)
With our approach, we don’t just throw numbers at you and leave you to make a decision. We’re with you every step of the way, helping you understand what the numbers and scenarios mean, facilitating internal discussion if you need it, and acting as your sounding board – so you can make sound financial choices, grow faster and maximise profit.
If that’s the kind of financial partnership you’re looking for, please get in touch with us today.
Simply email garry@insightassociates.co.uk or call our office on 01279 647 447 to arrange a no-obligation consultation, where we can talk through your financial management needs, tell you more about what we do and see whether there’s potential to work together.
Warmly,
Garry
