Thinking about the unthinkable:
 Crisis scenario planning and the board

As boards contemplate the year ahead, they face a challenging risk environment. From technology to politics to climate change, there’s a seemingly constant emergence of new crises that are increasing in scope and complexity. For boards of directors, crisis scenario planning brings a sense of calm to the storm, anticipating and preparing them for potential crises that could impact operations, reputation, or financial condition, among other things. When done right, scenario planning can help the board more effectively guide and support the organization in navigating crises, ensuring agile decision-making and long-term resilience.

Scenario planning is identifying a crisis—or a fact pattern that could lead to a crisis—and developing scenarios as to how the crisis might progress and how the company would address it. However, scenario planning is not necessarily as easy or straightforward as this simple summary might suggest. On the contrary, it entails careful thought, planning, and execution around the following components:

Identifying scenarios: To be effective, a crisis scenario should be relevant to the company—and one that would require an immediate response. The board should work closely with management to understand the prioritized list of risks and crises, their potential immediate and long-term impacts on the business, and the possible scrutiny from regulators, investors, and the media, among others.

Developing scenario narratives: How does the scenario progress? As the scenario proceeds, it will need to follow two parallel routes—the progression of the crisis itself and how the company responds to it. The narrative, as well as both routes, need to be realistic, relevant, and explore a range of potential outcomes—good and bad.