Scenario

Definition

A Scenario describes a path of development leading to a particular outcome. A plausible description of how the future may develop based on a coherent and internally consistent set of assumptions about key driving forces (e.g., rate of technological change, prices) and relationships.

Note that scenarios are neither predictions nor forecasts but are used to provide a view of the implications of developments and actions. Scenarios are not intended to represent a full description of the future, but rather to highlight central elements of a possible future and to draw attention to the key factors that will drive future developments. It is important to remember that scenarios are hypothetical constructs; they are not forecasts or predictions nor are they sensitivity analyses

• A scenario that is selected to probe potentially adverse outcomes is termed a Stress Scenario
• Scenarios are central elements of Scenario Analysis
• In the context of Climate Change, projections of man-made emissions constitutes an Emissions Scenario

Scenario Characteristics

• Plausible. The events in the scenario should be possible and the narrative credible (i.e., the descriptions of what happened, and why and how it happened, should be believable).
• Distinctive. Each scenario should focus on a different combination of the key factors. Scenarios should be clearly differentiated in structure and in message, not variations on a single theme. Multiple scenarios should be used to explore how different permutations and/or temporal developments of the same key factors can yield very different outcomes.
• Consistent. Each scenario should have strong internal logic. The goal of scenario analysis is to explore the way that factors interact, and each action should have a reaction. Neither actors nor external factors should completely overturn the evidence of current trends and positions unless logical explanations for those changes are a central part of the scenario.
• Relevant. Each scenario, and the set of scenarios taken as a whole, should contribute specific insights into the future that relate to strategic and/or financial implications of all applicable risks and opportunities.
• Challenging. Scenarios should challenge conventional wisdom and simplistic assumptions about the future. When thinking about the major sources of uncertainty, scenarios should try to explore alternatives that will significantly alter the basis for business-as-usual assumptions.

Business Continuity Context

A pre-defined set of Business Continuity events and conditions that describe, for planning purposes, an interruption, disruption, or loss related to some aspect(s) of an organization's business operations to support conducting Business Impact Analysis, developing a continuity strategy, and developing continuity and exercise plans.

Sustainable Finance Context

A plausible description of how the future may develop based on a coherent and internally consistent set of assumptions about key driving forces (e.g. rate of technological change, prices) and relationships.

See Also

• Climate Scenario
• Macroeconomic Scenarios