ACCA Strategic Professional · Strategic Business Leader · Environmental issues
Corvane Energy, a regional power utility, is unsure how regulation, battery costs and consumer behaviour will evolve over the next 15 years. The board asks the strategy team to build several internally consistent descriptions of possible futures, built around the two most uncertain and high-impact drivers, and to test the current strategy against each. Which approach is the board using?
The board is using scenario planning. It creates several plausible, internally consistent futures built around the most uncertain, high-impact drivers and tests the strategy in each, rather than relying on one forecast, a factor checklist or simple extension of past trends.
- AScenario planningCorrect
- BSensitivity analysis on a single forecast
- CPESTEL checklist analysis
- DExtrapolation of historical trends
Explanation
Scenario planning builds several plausible, internally consistent futures around critical uncertainties and tests strategies against each. A single-forecast sensitivity analysis varies one number around one expected future. PESTEL only lists factors and trend extrapolation assumes the past continues.
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