Agent-Based Modelling for Scenario Analysis in Management Consulting

Abstract

This paper investigates the modernization of a corporate practice called scenario analysis. It is widely used across the globe, originating from World War II, helping companies to gain a better understanding of potential future outcomes. In order to modernize scenario analysis, this paper will explore the novel approaches; of a hybrid development between agent-based modelling (ABM) and scenario analysis, the utilization of bottom-up and industry view approaches and introducing elements of human social behaviour. All these features are integrated in a single scenario analysis ABM that will model the fundamental philosophy behind the daily operations of a large corporation, such as Deloitte. This paper addresses more natural evolutions for scenarios, by looking at the firms' fundamental building blocks, rather than just an objective view based on the firms' financial statements. This model will focus upon accurate representations of the daily interactions of an enterprise, especially improving the explainability and transparency of causality in scenario analysis generated by the models, in order to achieve enduring agreements among executives about the firm's future. With this novel approach to scenario analysis, the modelling of a firm with the use of an ABM, there is the potential to provide more in-depth micro-observations of the future, rather than the conventional scenario analysis methods performed today.