How to select the right scenario planning tool for your business

Balancing value and volatility is no easy task for chief risk officers (CROs). According to PWC, the rise of technologies such as AI has created both “a growing appetite for risk and a corresponding imperative to deploy [these tools] responsibly to help manage risk.” Scenario planning helps anticipate and address volatility before it impacts business value.

Many CROs, however, are stuck with clunky, reactive scenario-planning processes that rely on static spreadsheets and manual operations. With 89% of CROs now prioritizing expanding their function across the enterprise, and 81% saying that the effective use of data and technology is critical to quantify risk, it’s clear that risk officers need a more proactive approach to navigate volatility and capture value.

In this piece, we’ll explore the benefits of scenario planning tools and offer practical advice to help find your best fit for comprehensive risk management.

Scenario planning tools for CROs

Scenario planning tools help companies plan for the best and prepare for the worst.

Let’s look at a simple example. Bob’s Bank is deploying a new, customer-facing mobile application. Ideally, the go-live goes smoothly, but what happens if undetected vulnerabilities put client data at risk, or unexpected system interactions cause the application to crash?

This is the benefit of scenario planning tools. By partnering with experienced risk management solution providers, businesses can deploy technologies that allow them to run multiple scenarios using multiple risk evaluation techniques to assess the possible impact of security threats, accidental misuse, or interoperability issues.

With so many tools now available, however, CROs need a solid framework for evaluating and selecting solutions that meet current needs and scale to address changing requirements.

At a high level, this means prioritizing partners that offer in-depth data modeling, multiple scenario options, comprehensive dashboards, and built-in reporting.

What is scenario planning?

Scenario planning is the process of asking and answering two critical questions: “What if?” and “What then?”

Consider the example above. Bob’s Bank knows what they want to happen — their mobile app rolls out smoothly, doesn’t crash the network, and makes it easy for customers to access their data.

Scenario planning helps the bank explore what happens if things don’t go to plan. For example, they might create a scenario in which the application suffers a DDoS attack and another in which API connections don’t work as intended. Other possible scenarios include unexpected network failures or data transfer issues that put clients’ privacy at risk.

By evaluating the likelihood of these scenarios and their potential impact, Bob’s Bank can ensure it’s not caught off guard if deployment doesn’t go as planned.

Effective scenario planning uses a combination of assessment and action methodologies to reduce total risk. They include:

Monte Carlo models

Monte Carla models use repeated random sampling, known as simulation, to estimate the probability of risk.

These models are often used for complex scenarios with multiple potential causes and possible outcomes. Repeated analyses using different parameters can provide a baseline risk probability.

Bowtie analysis

Bowtie analysis is so-named because it uses a bowtie-shaped diagram to evaluate risk.

In the middle of the diagram is the risk event. This could be a building fire, an IT security breach, or financial fraud. On the left-hand side of the bowtie are potential causes. Next to causes are preventative controls, which can help mitigate risk.

On the far right-hand side of the diagram are consequences, and directly to their left are mitigating controls that can limit the impact of a risk event when it occurs.

Consider the example of a building fire. Causes include electrical issues and hot plates, while training and drills can reduce the risk of the event. Mitigating controls include fire alarms and extinguishers, while consequences range from property damage to injuries.

Response planning

Response planning focuses on identifying what happens after a risk event occurs. By running multiple scenarios and creating multiple response plans, companies can reduce the potential impact of identified risks.

Response planning is improved by running regular evaluations and providing staff training to provide familiarity with events, risks, and responses.

What scenario planning tools actually do — and why they are helpful

Scenario planning tools help teams visualize the impact of both likely and unlikely scenarios and evaluate their potential risks. Consider a company creating supply chain scenarios. In one such scenario, teams ask what would happen if a primary supply partner suddenly went out of business. While this scenario is unlikely, it could have far-reaching implications on sourcing costs, logistics planning, and inventory management.

While staff-only speculation provides a generalized idea of possible outcomes, scenario planning tools leverage cross-departmental data to deliver actionable insights. Four components form the foundation of effective scenario modeling tools:

Data modeling & assumptions

Data modeling identifies and establishes relationships between data that humans often miss. Using this data, scenario tools then make likely assumptions to estimate the risk of specific scenarios.

Risk/uncertainty simulations

Some events are risky. Others are uncertain. Simulations of both are necessary to determine the total potential impact of an event on business decisions and operations.

Multi-scenario dashboards

Even small changes can significantly impact future outcomes. Tools that offer multi-scenario dashboards let teams run multiple scenarios simultaneously to see which combination of circumstances yields the greatest benefit or the largest potential loss.

Reporting to leadership/board

Tools with built-in reporting capabilities make it easy for CROs to keep stakeholders and board members in the loop. The more leaders know — and the better they understand it — the more likely they are to support CRO objectives.

Choosing the right tool for your organization’s maturity

According to research firm McKinsey, for CROs to succeed, they must exert greater influence and manage more risk.

This starts by selecting the right tool for the task. Spending too much on scenario-planning tools that aren’t used or don’t deliver expected outcomes can lead to both lost revenue and reduced resource allocation in the next fiscal year. Spending too little, meanwhile, can leave companies ill-prepared for scenarios that could be easily mitigated or avoided.

Choosing the right scenario planning tool means matching its feature set and price point to the current organizational maturity. Here’s what that looks like in practice:

Early maturity

Companies in the early stages of risk maturity benefit from flexible, no-code scenario tools that require minimal integration and can be deployed easily. These organizations aren’t looking for solutions that support in-depth customization by technology experts — instead, they’re after tools that can scale with them and provide an easy way to consider multiple scenarios that could enable or delay growth.

For early-maturity companies, scenario planning often takes the form of bowtie analysis targeting specific risk domains, such as operations or cybersecurity.

Middle maturity

Mid-maturity organizations need connected risk solutions combined with in-depth dashboards that provide clear visualizations. This allows them to conduct both bowtie and Monte Carlo analysis across different risk domains to improve overall risk visibility.

As a result, these organizations benefit from solutions that connect data across departments and present it, with clear dashboard visualizations as an essential component of strategic risk management.

High maturity

High-maturity enterprises have the infrastructure and staff in place to handle common risks and disruptions. CROs are often equipped with budgets and resources that allow them to target high-risk areas and create predictive frameworks that enable proactive responses.

What these enterprises and CROs need are scenario-planning tools with advanced FP&A integrations. By leveraging solutions that provide deep dives into financial planning frameworks and deliver comprehensive analytic outputs, often using AI, enterprises are better prepared to run multiple scenarios simultaneously, each with slightly different criteria and conditions. This enables a more granular look at potential pitfalls and helps CROs create contingency plans tied to specific triggers and events.

In practice, this means using bowtie and Monte Carlo analysis for risk management, establishing response plans for multiple scenarios, making business cases for investing in preventive or mitigating controls, and implementing the plans that enable them.

Key questions to ask vendors

Before you commit to any scenario planning vendor, it’s worth asking questions. Practical examples include:

How easy is it to tie planning tools to ERM?

Some planning tools integrate easily with existing ERM systems. Others require APIs or custom-built connectors, and still others are only usable if companies deploy IT workarounds.

Always ask about planning tool integration. Provide your potential information about your current ERM, and inquire about what (if any) integrations they offer.

Can non-finance leaders use it?

Many planning tools are geared toward finance business leaders. Some are specifically built to fulfill this function, while others wear multiple operational hats. With the demand for scenario planning on the rise, some vendors use vague language to denote widespread usability — make sure this is actually the case before diving in.

What reporting templates are built in?

Reporting templates help streamline the scenario-building process. The more built-in templates a solution has, the better. With more templates, staff need less time to create and evaluate these frameworks, and it’s easier to quantify key risk metrics.

How scalable is it across business units?

Scalability is critical to support business growth. As companies grow linearly, risks often grow exponentially. Solutions that struggle to scale will quickly become obsolete as risk scenarios become more complex and in-depth — this is especially problematic as business units separate to ensure effective functioning. With departments no longer connected, it’s easy to miss or underestimate risk. Scalable tools help solve this problem, so it’s worth asking how potential partners support this scalability.

What integrations are out of the box?

While it’s possible to build APIs or connectors, it’s always easier when tools offer integrations right out of the box. From real-time data exchange to testing automation, evidence collection, and continuous monitoring, integrations enhance scenario planning tools. Inquire with your vendor about their available and upcoming integrations.

It’s all part of the plan

Effective scenario planning helps CROs take control of risk management and avoidance strategies. Static workflows and manual operations, however, limit the reach and impact of these plans.

With the right scenario-planning tools, CROs can better consider multiple possibilities, design effective strategies, and gain a competitive advantage.

Ready to take charge of risk reduction? See how Optro helps CROs connect scenario planning to enterprise risk. Let’s talk.

About the authors

Claire Feeney is a Senior Product Marketing Manager at Optro focused on ESG and RiskOversight. In her role, she helps support organizations in transforming their enterprise risk management and sustainability programs. Prior to joining Optro, Claire worked in product marketing at OneTrust, VMware, and Infor. Connect with Claire on LinkedIn.

Marco Dyer is a Staff Product Manager at Optro, where he spearheads the development of risk quantification and scenario modeling initiatives. With over 13 years of experience scaling products within high-growth software organizations, Marco is dedicated to building tools that transform complex risk data into actionable business strategy. He is passionate about empowering customers to modernize their operations and achieve measurable, data-driven outcomes.