How scenario planning helps bring certainty to the uncertain

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Note from the editor

Few tools were more important to CFOs during the pandemic than scenario planning. In ways they couldn’t have imagined before it hit, the pandemic forced them to rely on and rethink their processes for anticipating their future landscape based on a range of assumptions.

Fortunately for John Cappadona, CFO of School of Rock, he had spent the previous two years building an FP&A team that immediately proved its worth. Thanks to its scenario planning, the company leadership settled on a response to the shutdowns that wasn’t at first obvious but proved to be smart. 

Instead of discounting fees to keep students on board when the music classes moved online, the company took advantage of the unexpected downtime musicians faced by getting big-name stars to step in as teachers.

"We were deriving 100% of our revenue from something that did not exist two months ago,” said Cappadona. 

 The change didn’t completely stem the company’s losses, but it kept them to a manageable level until it could return to its traditional model — while also making its virtual programs a permanent part of its offerings.

It’s because of the importance of scenario planning that Verizon CFO Matthew Ellis brought in outside experts to vet the assumptions his team used in its pandemic modeling.

“To ensure we hadn't missed something, it was valuable to pressure-test our assumptions against external parties — consultants and banks, things like that," Ellis said. 

Thanks to the massive amounts of data — both internal micro historical data and external macro business data CFOs can produce more robust scenarios than ever before. And they have the data-crunching power to surface conclusions they might have missed before.

To help you as you launch, or rethink, your own scenario planning capabilities, we’ve compiled a handful of stories from CFO Dive that we think might be useful to you. The pieces explore some new ideas, like the uncertainty cube that some planners use, as well as the levers CFOs pull based on what their planning shows them. We hope you find the pieces useful.

Robert Freedman Editor

A CFO's stress-tested model bears out

The Center for Naval Analyses benefited from the financial model Christian Geyer created despite its hard-to-believe forecast.

• Published March 13, 2021

CFOs facing an unprecedented range of risks find an edge in analytics

CFOs are adapting to an unusually hazardous business landscape by forecasting with advanced data analytics.

• Published March 8, 2021

'Uncertainty cube' touted for sharper modeling

By analyzing more variables over more paths, FP&A teams can narrow down risk scenarios, McKinsey analyst Aleksander Petrov says.

• Published March 15, 2021

Modeling skills a key shift in FP&A teams, CFOs say

The pandemic has accelerated a trend in which new finance hires are expected to bring modeling competency to improve predictive analytics capabilities.

• Published Sept. 22, 2020

Scenario planning helped School of Rock go virtual in 12 days

Just before mandatory shutdowns disrupted its business model, CFO John Cappadona built School of Rock's FP&A function.

• Published June 11, 2020

Verizon CFO welcomed external advice for pandemic scenario planning

When COVID-19 hit, Matt Ellis consulted outside experts to help ensure his FP&A team's assumptions about going forward were realistic.

• Published June 25, 2020

How CFOs are using scenario planning for certain responses

Few tools were more important to CFOs during the pandemic than scenario planning. With the massive amount data and analytics at hand, CFOs can produce more robust scenarios today than ever before, and leaders like Verizon CFO leveraged this to vet the assumptions his team used in its pandemic modeling.

included in this trendline
  • How scenario planning helped School of Rock go virtual in 12 days
  • Verizon CFO welcomed external advice for pandemic scenario planning
  • Modeling skills a key shift in FP&A teams, CFOs say
Our Trendlines go deep on the biggest trends. These special reports, produced by our team of award-winning journalists, help business leaders understand how their industries are changing.
Davide Savenije Editor-in-Chief at Industry Dive.