Use Of Scenario Analysis Research Articles

The Challenge of Climate Change Adaptation: Learning from National Planning Efforts in Britain, China, and the USA

This article examines projected climate impacts and national planning efforts in three major countries: the USA, UK and China. The three countries are in varying stages of planning for climate adaptation. Planning frameworks in all three countries suffer from a lack of spe- cificity and urgency. To address this situation, the article recommends two measures. The first is the use of scenario planning, including consideration of high-impact scenarios, to address the downside risks of climate change. Planning in the UK has begun to make use of scenario analysis, although in a less comprehensive manner, while the USA had an earlier experiment in the use of the worst-case scen- ario as a planning tool. The second recommendation is to identify and prioritise impacts on vulnerable populations such as the elderly, the poor and coastal communities. This recommendation has roots in the US planning proposals, but also resonates with international human rights law.

Reforming the world monetary system

PurposeThe purpose of this paper is to examine Fritz Machlup's method and use of scenario analysis in the policy discussions around exchange rate solutions to balance of payments problems.Design/methodology/approachThe qualitative research on which this paper is based is the sociohistorical biographical approach, based on a close examination of published works and archival materials.FindingsWhat makes Machlup unique is his focus on the impact to an economic system of discrete human actions, each set of actions associated with a change in exchange rate policy and the operations and institutions necessary to implement it. Impact on the system was evaluated in terms of three values – balance of payments adjustment, liquidity and confidence. In his use of a system's approach, his focus on change and adjustment to change, and most particularly his focus on human action, Machlup is also distinctively Austrian.Research limitations/implicationsThis is the first paper generated from the author's far larger planned study of Fritz Machlup and the Bellagio Group.Practical implicationsThe collaborative exploration of alternative futures by senior teams has become increasingly important to strategic planning by governments and corporations.Originality/valueThe story of the Fritz Machlup's contribution to exchange rate regimes, international trade and the balance of payments has remained largely untold.

Planning the unplannable: Scenarios on the future of space

This article explores the use of scenario analysis as a methodology to rigorously analyze potential space futures, particularly with respect to space security challenges, in the context of rapid and uncertain change across several dimensions of human space activities. The successful use of scenario analysis in other (e.g. corporate and military) sectors is described and results of an initial scenario analysis workshop are presented. Scenario analysis is recommended as a promising approach to evaluating the long-term consequences of various policy choices in the context of uncertainty, and as a process well-suited to fostering communication and building consensual knowledge among diverse stakeholders.

Challenges for CO2 mitigation in the Lebanese electric-power sector

Abstract Similar to other developing countries the electricity sector in Lebanon is monopolized by a vertically integrated public utility, Electricite Du Liban (EDL). EDL's supply is characterized by frequent and lengthy power cuts that have given rise to an alternative, informal, and unregulated backup sector, which serves to satisfy electricity demand during the extended blackout periods. This paper examines the evolvement of the backup sector and its related CO 2 emissions via the use of scenario analysis. The economic and energy policy implications of each scenario are discussed and a number of policy options are presented to ensure that the growth in CO 2 emissions is contained. Results clearly indicate that the backup sector plays a critical role in the success of any greenhouse gas mitigation commitment undertaken by Lebanon. A clear strategy on dealing with this sector needs to be devised simultaneously if not prior to any climate change policy at the national level.

Renewable energy technology portfolio planning with scenario analysis: A case study for Taiwan

This paper presents the results of a case study of applying a systematic and proven process of technology portfolio planning with the use of scenario analysis to renewable energy developments in Taiwan. The planning process starts with decision values of technology development based on a survey of society leaders. It then generates, based on expert opinions and literature search, a set of major technology alternatives, which in this study include: wind energy, photovoltaic, bio-energy, solar thermal power, ocean energy, and geothermal energy. Through a committee of technical experts with diversified professional backgrounds, the process in this study next constructs three scenarios (“Season in the Sun”, “More Desire than Energy”, and “Castle in the Air”) to encompass future uncertainties in the relationships between the technology alternatives and the decision values. Finally, through a second committee of professionals, the process assesses the importance and risks of these alternative technologies and develops a general strategic plan for the renewable energy technology portfolio that is responsive and robust for the future scenarios. The most important contributions of this paper are the clear description of the systematic process of technology portfolio planning and scenario analysis, the detailed demonstration of their application through a case study on the renewable energy development in Taiwan, and the valuable results and insights gained from the application.

Entrepreneurship and rural economic development: a scenario analysis approach

Purpose – The purpose of this paper is to advocate the use of scenario analysis to develop foresight for the improvement of policies supporting rural entrepreneurship and illustrate the approach with an application in Mid Wales.Design/methodology/approach – A general overview of the economic problems of rural areas and their manifestation in the case study of Mid Wales is followed by an outline of the origins and approach of scenario analysis. Application of the technique involved a group of policy makers and entrepreneurs undertaking a structured programme of scenario development. The resulting scenarios, their usefulness for enterprise support, and wider implications are summarised.Findings – The scenario analysis exercise enabled key stakeholders to confront and deal with considerable uncertainties by developing a shared understanding of the barriers to small firm growth and rural economic regeneration.Research limitations/implications – A major conclusion is that effective approaches for support of ru...

Modelling decision support and uncertainty for large transport infrastructure projects: The CLG-DSS model of the Øresund Fixed Link

This paper presents a decision support system, named the CLG-DSS model, which makes it possible for decision makers to assess various uncertainties in project appraisal in a systematic and explicit way. This model, a decision support system (DSS) developed within the Danish Centre for Logistics and Freight Transport (CLG) is based on cost-benefit analysis (CBA) embedded in a wider multi-criteria analysis (MCA) by the use of some principles for composite modelling assessment (COSIMA). The CLG-DSS model is set up to make use of scenario analysis (SA) and Monte Carlo simulation (MCS). A particular concern in the model is the handling of varying information across the assessment criteria and the application of SA to inform the MCS parameter setting. After the presentation of the modelling principles some ex-post case calculations for the Øresund Fixed Link are illuminating different aspects of appraisal uncertainty and thereby, at the same time, demonstrate the features of the CLG-DSS model as a useful decision support tool. It is finally concluded that appraisal of large infrastructure projects can be effectively supported by dealing with uncertainty issues in accordance with the principles described.

Use of scenarios in strategic and political risk analyses

Over the next 10 to 15 years, the international system (and corporations) will have to adjust to changing power relationships in key regions. These have the potential to provide discontinuities greater in impact than the end of the Cold War. Numerous crises have already surprised economists, ratings agencies, governments and strategic planners alike. Use of scenario analysis is particularly useful in circumstances where it is necessary to take a long‐term view of strategy, and where there is a high level of uncertainty about external influences. One of the principal problems however, is that not enough attention is paid to potential political risk discontinuities with the organization deprived of critical intelligence about the external environment. Building in the flexibility to strategic thinking to understand the possibilities and risks offered by a range of futures is the key to success, if the modern corporate is to be in the best possible state of preparedness for the years ahead. A China case study demonstrates that opposite scenarios for the future are equally plausible, while the history of hegemonic predictions is deeply flawed. Part of the problem being that decision making, whether in the State or strategy department may not be “rational.” The Saudi Arabia case study offers scenarios with global implications. There is no crystal ball that enables analysts to predict future aspects of international relations with certainty, but the aim of scenario analysis is not to be occasionally right about the future, as never to be wrong.

Design of Robust Emission Reduction Strategies for Road-Based Public Transportation in Mexico City, Mexico: Multiattribute Trade-Off Analysis for Metropolitan Area

Transportation-related air pollution is one of the major problems facing many megacities in developing as well as developed countries. The design of air quality strategies for the road-based public transportation system in the Mexico City metropolitan area (MCMA) is considered. An analysis is done of 28 different emission reduction strategies consisting of bundles of technological and supply and demand management emission reduction policies across alternative future development scenarios of the MCMA in the 2000-2025 period. The analysis combines demand modeling, fleet evolution modeling, mobile-source emissions modeling, and trade-off analysis to evaluate the impact of these emission reduction strategies and to determine their cost-effectiveness. The combined use of scenario analysis and multiattribute trade-off analysis is a unique approach that allows the design of strategies that are robust across a range of future uncertainties. Results of the analysis show that combinations of aggressive technological and supply and demand management strategies are needed to achieve sustained emission reductions in the 2000-2025 period. The recommendation calls for combinations of strategies that rely on aggressive hybrid vehicle introductions, catalyst and particulate matter and nitrogen oxide filter retrofitting, dedicated busways, public transportation fare integration, and subsidies and fuel taxes. These combined strategies can reduce transportation emissions by more than 85%. Results also indicate that even the most aggressive strategies fail to achieve sustained emission reductions in the case of urban sprawl and the rapid growth in transportation demand.

Bayesian Methods for Measuring Operational Risk

The likely imposition by regulators of minimum standards for capital to cover 'other risks' has been a driving force behind the recent interest in operational risk management. Much discussion has been centered on the form of capital charges for other risks. At the same time major banks are developing models to improve internal management of operational proceses, new insurance products for operational risks are being designed and there is growing interest in alternative risk transfer, through OR-linked products. The purpose of this paper is to introduce Bayesian belief networks (BBNs) and influence diagrams for measuring and managing certain operational risks, such as transaction processing risks and human risks. BBNs lend themselves to the causal modelling of operational processes: if the causal factors can be identified, the Bayesian network will model the influences between these factors and their contribution to the performance of the process. The ability to refine the architecture and parameters of a BBN through back testing is explained, and the paper also demonstrates the use of scenario analysis in a BBN to identify states that lead to maximum operational losses.

Special Section: Strategic Information Systems

ERIC K. CLEMONS is Professor of Operations and Information Management at the Wharton School of the University of Pennsylvania. His research and teaching interests focus on the strategic and competitive uses of information systems. Within the emerging field of information systems economics, his work addresses the changes that information technology enables in the competitive balance between new entrants and established, previously dominant industry participants; targeted marketing and precision pricing strategies; managing strategic business transformation; and the impact of information technology on procurement and outsourcing. Industries of focus include international securities markets and financial services firms, consumer packaged goods retailing, telecommunications, and travel. He specializes in assessing the competitive implications of information technology, and in managing the risk of large-scale implementation efforts. Dr. demons is also Project Director for the Reginald H. Jones Center's Sponsored Research Project on Information: Industry Structure and Competitive Strategy, area coordinator for Information: Strategy, Systems, and Economics, and senior fellow in the Wharton Financial Institutions Center. He holds an S.B. in physics from MIT and an M.S. and Ph.D. in operations research from Cornell University. He has twenty-three years of experience on the faculties of Wharton, Cornell, and Harvard, and consulting experience in the private and public sectors, both domestically and abroad. His consulting, like his research, focuses on exploiting the full competitive potential of the information made available by modern technology. Dr. Clemons is currently a member of the editorial board of the Journal of Management Information Systems and the International Journal of Electronic Commerce. He has served on the Congressional Office of Technology Assessment study of securities markets and on the Quality of Markets Advisory Board of the London Stock Exchange. His recent publications address the use of information technology to manage strategic sourcing decisions, the use of scenario analysis to manage the risks of strategic business transformation, and targeted marketing and the competitive advantage of new entrants.

TOWARD A METHOD OF EXPOSING HIDDEN ASSUMPTIONS IN MULTICULTURAL CONFLICT

This study examines the method of scenario analysis as a means of exposing hidden assumptions which cause misattributions that lead to multicultural conflict and as a way of assessing cross‐cultural understanding. Results from thirty‐five critical incident interviews of technical professionals and semi‐structured scenario questionnaires from graduate business and engineering students are presented. The results provide support for the use of scenarios as a method of exposing hidden assumptions leading to multicultural conflict and as a process which helps participants deal with the conflict. Implications for organizational research and practice are discussed, including the use of scenario analysis as an evaluation and measurement tool for culturally‐related conflict in organizations.

Scenario planning—What style should you use?

Recently, increasing emphasis is being placed by corporate planners and forecasters on the use of scenario analysis to produce forecasts of future business environments and to identify conditions leading to major changes in these enviroments. This article compares some of the major approaches to scenario analysis, including intuitive logics (SRI International), trend-impact analysis (The Futures Group), and cross-impact analysis (The Center for Futures Research and Battelle Columbus Division). The advantages and disadvantages of each approach are discussed as well.

Alternative methods for developing business scenarios

Recently increasing emphasis is being placed by corporate planners and forecasters on the use of scenario analysis to produce forecasts of future business environments and to identify conditions leading to major changes in these environments. This article compares some of the major approaches to scenario analysis including intuitive logics, trend-impact analysis, and cross-impact analysis. The advantages and disadvantages of each approach are discussed along with case study examples from the key practitioners such as SRI International, The Futures Group, The Center for Futures Research, and Battelle Columbus Division.