Scenario planning combined with probabilities as a risk management tool - analysis of pros and cons

Helena Gaspars-Wieloch

International Journal of Economics and Business Research, 2021, vol. 21, issue 1, 22-40

Abstract: Scenario planning and probabilities are often very helpful in uncertain decision problems. In the paper, we examine the correctness of combining probabilities with scenario planning in risk management. We make a literature review and analyse diverse decision problems differing from each other with regard to their nature, the decision maker's objectives and preferences. We explore competition, quality, innovation, resource allocation, inventory and banking issues. The illustrative examples concern both one-criterion and multi-criteria decision problems. We get to the point that scenario planning is an unquestionable support for risk management. Nevertheless, the use of probabilities as an accompanying tool may be necessary and justified merely in some specific cases.

Keywords: scenario planning; probabilities; risk management; risk assessment; uncertainty; payoff matrix; scenarios; decisions; banking; saving rates; spare parts quantity problem; product quality; innovations; coefficient of pessimism. (search for similar items in EconPapers)
Date: 2021
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Citations: View citations in EconPapers (4)

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Persistent link: https://EconPapers.repec.org/RePEc:ids:ijecbr:v:21:y:2021:i:1:p:22-40

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