FORMULA CARD
Build downside, base and upside cases
Change a small number of assumptions and state what must be true in each case
Scenario discipline
- Start from one accepted base case.
- Choose no more than three decision-driving assumptions.
- Set downside and upside values with evidence.
- Calculate the change in the decision output.
- Write the observable condition that would make each case credible.
A good scenario
Downside: volume growth slows to 2% because the disclosed order backlog declines; EBIT margin remains at 12% because fixed costs do not flex.
A weak scenario
“Downside = bad market” without a changed assumption, mechanism or observable evidence.