Scenario Analysis - Revision history

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'''Scenario Analysis''' is conducted, to analyze the impacts of possible future events on the system performance by taking into account several alternative outcomes, i.e., scenarios, and to present different options for future development paths resulting in varying outcomes and corresponding implications. Scenario analysis is the process of forecasting the expected value of a performance indicator, given a time period, occurrence of different situations, and related changes in the values of system parameters under an uncertain environment.

Basic Scenarios<ref>The Three Basic Scenarios
When performing the analysis, managers and executives at a company generate different future states of the business, the industry, and the economy. These future states will form discrete scenarios that include assumptions such as product prices, customer metrics, operating costs, inflation, interest rates, and other drivers of the business. Managers typically start with three basic scenarios:
*Base case scenario – It is the average scenario, based on management assumptions. An example – when calculating the net present value, the rates most likely to be used are the discount rate, cash flow growth rate, or tax rate.
*Worst case scenario – Considers the most serious or severe outcome that may happen in a given situation. An example – when calculating the net present value, one would take the highest possible discount rate and subtract the possible cash flow growth rate or the highest expected tax rate.
*Best case scenario – It is the ideal projected scenario and is almost always put into action by management to achieve their objectives. An example – when calculating the net present value, use the lowest possible discount rate, the highest possible growth rate, and the lowest possible tax rate.

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 == See Also ==
-*[[IT Strategy (Information Technology Strategy)]]
+*[[IT Strategy (Information Technology Strategy)|IT Strategy]]
 *[[IT Governance]]
 *[[Enterprise Architecture]]

← Older revision		Revision as of 18:12, 8 March 2024
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	Another challenge of scenario-building is that "predictors are part of the social context about which they are trying to make a prediction and may influence that context in the process". As a consequence, societal predictions can become self-destructing. For example, a scenario in which a large percentage of a population will become HIV infected based on existing trends may cause more people to avoid risky behavior and thus reduce the HIV infection rate, invalidating the forecast (which might have remained correct if it had not been publicly known). Or, a prediction that cybersecurity will become a major issue may cause organizations to implement more security cybersecurity measures, thus limiting the issue.		Another challenge of scenario-building is that "predictors are part of the social context about which they are trying to make a prediction and may influence that context in the process". As a consequence, societal predictions can become self-destructing. For example, a scenario in which a large percentage of a population will become HIV infected based on existing trends may cause more people to avoid risky behavior and thus reduce the HIV infection rate, invalidating the forecast (which might have remained correct if it had not been publicly known). Or, a prediction that cybersecurity will become a major issue may cause organizations to implement more security cybersecurity measures, thus limiting the issue.
		+
		+
		+	== See Also ==
		+	*[[IT Strategy (Information Technology Strategy)]]
		+	*[[IT Governance]]
		+	*[[Enterprise Architecture]]
		+	*[[Chief Information Officer (CIO)]]
		+	*[[IT Sourcing (Information Technology Sourcing)]]
		+	*[[IT Operations (Information Technology Operations)]]
		+	*[[E-Strategy]]
		+
		+
		+
		+
		+
		+
		+	== References ==
		+	<references />

← Older revision		Revision as of 19:56, 8 April 2021
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−	'''Scenario Analysis''' is conducted, to analyze the impacts of possible future events on the system performance by taking into account several alternative outcomes, i.e., scenarios, and to present different options for future development paths resulting in varying outcomes and corresponding implications. Scenario analysis is the process of forecasting the expected value of a performance indicator, given a time period, occurrence of different situations, and related changes in the values of system parameters under an uncertain environment.<ref>Definition - What Does Scenario Analysis Mean? [https://www.sciencedirect.com/science/article/pii/B9780128142783000054 Şebnem YılmazBalaman]</ref?	+	'''Scenario Analysis''' is conducted, to analyze the impacts of possible future events on the system performance by taking into account several alternative outcomes, i.e., scenarios, and to present different options for future development paths resulting in varying outcomes and corresponding implications. Scenario analysis is the process of forecasting the expected value of a performance indicator, given a time period, occurrence of different situations, and related changes in the values of system parameters under an uncertain environment.<ref>Definition - What Does Scenario Analysis Mean? [https://www.sciencedirect.com/science/article/pii/B9780128142783000054 Şebnem YılmazBalaman]</ref>

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-'''Scenario Analysis''' is conducted, to analyze the impacts of possible future events on the system performance by taking into account several alternative outcomes, i.e., scenarios, and to present different options for future development paths resulting in varying outcomes and corresponding implications. Scenario analysis is the process of forecasting the expected value of a performance indicator, given a time period, occurrence of different situations, and related changes in the values of system parameters under an uncertain environment.
+'''Scenario Analysis''' is conducted, to analyze the impacts of possible future events on the system performance by taking into account several alternative outcomes, i.e., scenarios, and to present different options for future development paths resulting in varying outcomes and corresponding implications. Scenario analysis is the process of forecasting the expected value of a performance indicator, given a time period, occurrence of different situations, and related changes in the values of system parameters under an uncertain environment.<ref>Definition - What Does Scenario Analysis Mean? [https://www.sciencedirect.com/science/article/pii/B9780128142783000054 Şebnem YılmazBalaman]</ref?
 Basic Scenarios<ref>The Three Basic Scenarios
 When performing the analysis, managers and executives at a company generate different future states of the business, the industry, and the economy. These future states will form discrete scenarios that include assumptions such as product prices, customer metrics, operating costs, inflation, interest rates, and other drivers of the business. Managers typically start with three basic scenarios:
 *Base case scenario – It is the average scenario, based on management assumptions. An example – when calculating the net present value, the rates most likely to be used are the discount rate, cash flow growth rate, or tax rate.
 *Worst case scenario – Considers the most serious or severe outcome that may happen in a given situation. An example – when calculating the net present value, one would take the highest possible discount rate and subtract the possible cash flow growth rate or the highest expected tax rate.
 *Best case scenario – It is the ideal projected scenario and is almost always put into action by management to achieve their objectives. An example – when calculating the net present value, use the lowest possible discount rate, the highest possible growth rate, and the lowest possible tax rate.