Risk Assessment Techniques – Thinking About the Future with Scenario Analysis

(This post is part of the 31010 Series of posts on Risks & Ventures. For more information on this series please follow this link)

If you are in a long term relationship, or if you ever have been, you will likely have had some moments when you talk together with your partner about future plans where you start to map out different ideas of what life could look like for the two of you that depend on the choices you make and some of the situational factors that you can’t necessarily change.

You might not, for example, be able to influence the decision of the multi-national company that you work for when it chooses to relocate your office or position to another city, but it is in your power to decide to agree to move yourself and your family there rather than stay and look for something else you can do.

As a disclaimer of course  there may be some couples that are able to live together in the moment so well that they don’t feel the need to map out plans; and maybe a few luckier ones have found themselves in positions where they are content and the future seems more or less stable, comfortable and mapped out for them already. (e.g. the ones with very focused ambitions that made partner in law firms or private medical practice relatively early in their lives.) 

Less positively I guess there may also be some couples that are not very good at communicating their longer-term thoughts to each other at all but they may not stay together long enough to for longer-term thoughts to be relevant. 

Some of those discussions will be firmly rooted in facts and realism, and others will probably veer into scenarios that are less realistic, and as long as occasional day-dreaming and fantasy planning doesn’t replace reality, like starting to really believe that you definitely are going to win the lottery, or making it an actual part of your personal financial planning  that’s not usually going to be a problem. (1)  

Imagining the future is also something that business owners, or people that hold strategic decision-making responsibilities in businesses do too, and again while an entrepreneur knows it’s nice to imagine your company as a future tech unicorn or multi-national industrial giant, it’s also helpful to keep most of your normal day-to-day imagining grounded in realism, or at least realistic steps, even if you do have bold, ambitious underlying objectives for your business or division. 

Grounded, realistic discussions like this, whether they take place in the office or the home, look quite similar to the risk assessment technique of Scenario Analysis, which is included in IEC 31010, and is classified in this standard as a technique for identifying risks. (2)

How Do I do Scenario Analysis?

In formal Scenario Analysis a group of participants are brought together and given one or more scenarios which they first study and then work through collaboratively to come up with some ideas about future new outcomes, including any potential hazards and opportunities associated with those outcomes which they may collectively identify.

The number and depth of the scenarios and amount of analysis that is required can be varied by the administrators of the assessment so that a Scenario Analysis can be a short, highly controlled exercise, with a pre-defined time limit, or a much more in-depth and flexible one, or everything in between those two extremes, as long as the conditions are set from the start and the administrators of the process understand that they will get different outputs from different processes.

The kinds of topics that might be discussed by businesses at a strategic level Scenario Analysis include long-term future business strategy including acquisitions and mergers; new product lines; whether to enter new markets; and how different geo-political, demographic or climatic changes could effect a business. At an operational or tactical level it is an excellent tool for examining potential business disruptions for business continuity and crisis planning purposes. These could include:

  • What would happen if this data centre went offline?
  • How should we respond if tariffs are changed in the country where our factory is based?
  • How do we respond to a public relations issue relating to our products which is going viral?

The technique is also equally as applicable to public sector or non-profit policy-making environments as it is to commercial ones. 

Like other group risk assessment techniques, like Brainstorming and the Nominal Group Technique, in most cases the Scenario Analysis process will benefit from a group of participants that bring different perspectives, which could also mean some specific or external Subject Matter Expertise is desirable too if people don’t know enough about the technical aspects of a scenario. 

In longer Scenario Analysis sessions it may be possible to use large amounts of research and data to support the group’s conclusions, although shorter sessions are more likely to be based on the participants existing knowledge and opinions. 

Things to Look Out For During Scenario Analysis

Like all group risk assessment techniques the results of the process will be significantly influenced by the make-up of the group, both in terms of the knowledge that the participants bring and their personalities. (3) 

In Scenario Analysis the initial conclusions of the group sessions will usually resemble a bit of a narrative or story, so if there are any specific outputs, objectives or questions that the manager running the risk assessment process requires, these should be stated at the start of the scenario. Participants also need to be told how they need to present these desired outputs, for example whether a written report, briefing, list of bullet points, or a combination of styles.

Without being specific enough there is a danger that the analysis won’t be captured in way that is useful for the risk assessment administrators and the other executives that might benefit from it, losing at lot of the value of the process. Conversely being overly specific might limit a group’s creativity too, so a balance needs to be made.

Whereas Scenario Analysis is intended to be forward-looking – in other words trying to imagine potential future changes, rather than just trying to look at past trends as a guide – it can sometimes turn into a “best guess” technique, particularly in terms of long-term trends where there may be so many unknown factors to consider.

Practical Scenario Analysis

Of all the ISO 31010 Risk Assessment Techniques Scenario Analysis is one of the easier ones to do practically as an individual, and as we saw at the beginning of this post, this is a technique that many of us do something similar to quite regularly; however, if you want to make your future personal planning discussions a bit more like formal Scenario Analysis then the important thing to do is to try and make them a bit more formal and structured. This could include taking steps like:

  • setting some terms – what issues are you really looking at
  • setting some desired outputs – what do you want to know and how should that be presented (i.e. maybe a bullet point list)
  • setting a time limit – this could be extended or you could plan further sessions if you need but making sure this is a deliberate choice instead of lacking focus
  • turning off other distractions.

It is entirely possible to do a form of Scenario Analysis on your own too, but try to make it as formal as possible and set some conditions. This will make it more constructive, and give you clearer outputs.

Scenario Analysis is also not harmful rumination. It should have a specific agenda and time line. Spending hours catastrophising or creating castles in the sky isn’t Scenario Analysis, and as always with these kinds of techniques if you are worried about using them introspectively on yourself please try them first with a trusted friend, relative or counsellor.    


(1) R&Vs does believe an optimistic, glass-half-full attitude in life is an asset which when combined with structured action is a pathway to potentially realising dreams, but unlike some other popular self-help narratives we don’t believe that just dreaming or wishing something alone necessarily brings it any closer.  

(2) Remembering of course that risks are both hazards and opportunities. Bad stuff you want to avoid and good stuff you would like to happen to you or your company. 

(3) Our posts on Brainstorming and the Nominal Group Technique amongst others discuss this idea further. 




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