Key questions of a scenario planning after recession.

In these fast-changing and turbulent times, businesses are facing an uncertain future and conventional business models may no longer be viable. Many management teams will need to re-assess their operations and consider a number of possible scenarios.

As explained before in several articles in this blog, mmC Group thinks nobody can predict what is likely to happen to the overall economy, or indeed, the impact the current downturn may have on the telecom (or any other) industry or on a particular corporate. There are likely to be a range of outcomes, but to survive, management teams need to plan for the potential eventualities.

Managing in a downturn is all about being flexible, anticipating and reacting quickly to changing circumstances. This helps mitigate risks, while also positioning companies to seize any opportunities which arise. Investing management time in planning for different scenarios is not a luxury – given the volatility of the current economic environment, it is a necessity.

We’ve been recently supporting a “Scenario planning” department within a telecom operator in a Assessment of an economic downturn scenario and its impact in their group operations in Europe. This group required business intelligence on the external environment and an objective assessment of internal situation across countries. A common assessment of the divergent scenarios help the operator identify the actions to be taken today in order to mitigate the negative impact or take advantage of the opportunities offered in the future.

The work was done for the CEO that came to us asking: What questions should I ask myself? Here are some of our suggestions:

• How will the telecom business be impacted by an extended economic downturn?
• What geographies in which the company operate in will be impacted most? What are the likely repercussions for the industry and geographies?
• To what extent have we stress-tested our forecasts to account for changes in performance and outlook?
• Have we stress-tested forecasts over different time periods to reflect a potentially extended economic downturn?
• How good are management reporting and information systems at highlighting potential issues?
• What areas need to be monitored carefully?
• What are the key vulnerabilities in the operator’s business model? Is my model flexible enough to allow us to adapt quickly to a new environment?
• What is my long-term financial position? How significant would a material loss of revenue be?
• What are my competitors doing and are there opportunities for organic growth in the sector?
• How bad should performance get before we face a covenant/facility breach?
• Am I appraising the board regularly on performance and scenario planning/management?

I won’t share the final outcome of the project but I would like to share some relevant slides related to the market and the general impact on some major telecom KPIs. Enjoy the reading.

CVA. Happy Thanksgiving weekend to all!