Scenario planning in the public sector - lessons learnt for the next crises

How scenario planning can help the public sector find answers to tomorrow’s questions

Since early 2020, the coronavirus we have come to know as COVID-19 has dominated not just the global headlines, but every aspect of life around the world. The crisis, and its disruption of entire economies and societies, caught many unprepared. After all, nobody could have foreseen the turmoil COVID-19 would create in everything we thought of as “normal” – or could they?

From there to here: where are we now?

COVID-19 has already caused serious damage to the Swiss economy and will continue to constrain economic growth massively over the coming months. The greatest impact has been from lockdown and restrictions on our lives, a dramatic decline in demand, and generalised uncertainty, with a knock-on effect on planning. The full extent of COVID-19’s financial impact is not yet entirely clear, but some experts assume that the coming months and years will have an even greater impact on business balance sheets than the de facto shutdown of the economy in spring 2020. And as we move from pandemic to a post-pandemic environment, the public sector – like the private sector – is having to reform and transform its processes so that it can continue to provide services in a resource efficient way.

Impact: how have I been affected?

The COVID-19 crisis has had a major impact on all levels of the public sector, with radical change across the budgetary planning process, including the mainstays of the broader revenue and expenditure structure1. On the revenue side, restrictions on movement and recommendations to work from home have dramatically driven down the revenues of public transport, physical shops, and sports and leisure facilities. And despite many employees working from home, the revenues of partly fee-financed utilities (such as electricity and water) have plummeted (The City of Zurich , 2020). At the same time, public expenditure has soared under the growing pressure of the additional costs of support measures. To take just one example, the health service has had to spend more on additional protective equipment, while at the same time losing revenue as a result of procedures being cancelled. Meanwhile, the economy has had to be supported with guarantees and subsidies, alongside the cost of unemployment benefits and short-time working payments for employees.

Disruptive change: speed of reaction is crucial

COVID-19 is just the latest in a long – and lengthening – list of disruptors, ranging from technological developments such as artificial intelligence (AI) to demographic change, such as an ageing society, and natural or man-made disasters. Global change is dramatic – and its pace is more rapid than ever before. What all these disruptors have in common, however, is their fundamental impact on our now complex and connected world. One of the keys to any organisation’s success will be how rapidly and effectively it is able to respond to such change.

Reaction: how do we manage increasing uncertainty?

Ensuring the public sector can fulfil its mandate in this challenging and disrupted “new normal” while remaining resource efficient involves a number of factors.

Risk management has to be underpinned by processes ensuring a rapid and efficient response to any crisis situation. And that means planning and forecasting have to be rapidly and easily adaptable.

In the mid-term, sound reporting procedures will enable organisations to assess a situation and to adapt to it in the longer term.

At first sight, in a crisis, it appears entirely rational to focus solely on survival. However, understanding the factors involved in the crisis and their impact on individual organisations is equally important. It helps with tackling the current crisis – and if organisations do not reflect on the factors involved in the current crisis, they will be left as unprepared for future crises as they were for this one.

Foresight, agility and resilience make for crisis-resistant (financial) organisation. Organisations can be likened to ships sailing through uncharted waters. Foresight involves scanning the horizon for immediate threats and anticipating changes in the sea conditions or the weather. Agility means being able to change course rapidly and effectively when those conditions change unexpectedly. And resilience can help the ship and its crew to withstand the impact of storms and emerge stronger as a result. (Deloitte Insights, 2020)

The approach: how does it work in practice?

Scenario planning creates stability in turbulent conditions. When the priority is to tackle the most urgent needs, and where budgetary stability and planning certainty are vital, dynamic scenario planning reduces the time taken to identify the right priorities in the long term.

The three stages of scenario planning:

1. Understanding the situation: what factors underpin financial indicators?

Getting to grips with a new context and planning accordingly means first urgently identifying the key drivers and significant external influences on financial indicators, analysing both historical internal data and external indicators for sensitivity and correlation. The relevant data points are filtered out from millions of possible data points using statistical processes. Including wide-ranging external indicators, such as social, economic and political factors, helping to explain more of the variation within financial indicators than internal data alone would do.

2. Scenario planning: what are the possible future scenarios?

Stage two involves compiling coherent drivers and influences into diverse scenarios and highlighting plausible trends. The impact of these scenarios on the organisation can then be calculated with a dynamic scenario model that portrays the organisation from a financial perspective. A range of dynamic future scenarios can be simulated using “what if” models. Finally, analysis determines what potential financial impact the events in any particular scenario will have on the organisation. This process creates foresight.

3. Identifying measures: how should we be managing in future?

The scenarios defined and simulated form the basis for identifying the optimum measures and strategies for managing the organisation in the current environment. Their mechanisms can be anticipated and adjusted where necessary through ongoing simulations. Their impact is then tested in iterative cycles within the scenario model until the desired level of impact is achieved. This process creates an agile set of measures that can be continuously adapted and implemented to help the organisation become more resilient. This process can – and should – take place at all levels of the organisation.

CFOs of public sector and public-law organisations in particular are having to adapt to an economic environment that is changing more rapidly and radically than at any time. Scenario planning enables them dynamically to assess constant fluctuations in financial flows and supports them in compiling a balanced budget and financial situation.

Conclusion: successfully tackling crises requires rapid reaction COVID-19 has radically changed life and the economy in Switzerland and elsewhere. And COVID-19 will not be the last pandemic we have to tackle – or the last disruptor: this virus is just the latest addition to an ever-lengthening list of disruptors.

Rapid and effective reaction to such far-reaching impact in an increasingly complex and connected world is crucial. The aims must be (i) to respond to the crisis in the short term, (ii) to contain it in the mid term and (iii) to find ways of adapting to it in the long term. Foresight, agility and resilience are the tools. Even before COVID-19, data-driven decision making gave organisations a competitive edge. What the pandemic has now demonstrated beyond any remaining doubt is that rigid models based on historical internal data are no longer fit for purpose in a rapidly changing world. Dynamic scenario planning offers greater insight and creates a clearer and longer-term perspective. Switching to scenario planning is not a lengthy and complex process: it can be achieved within just a few weeks.

Now is the time to learn the lessons from the current crisis that will help us to see through the next crises. Scenario planning can help the public sector to find the answers today to the questions of tomorrow.

Let’s start working together on a proof of concept!

The best way of demonstrating the potential of scenario planning is a “proof of concept”. Working together, we can devise a proof of concept for a planning sub-process, such as sales planning, within six to eight weeks.

And once the first proof of concept has been established, the model can be refined and rolled out stage by stage.

Make a start today on looking to the future.

1The tax take is the only indicator that has emerged relatively unscathed in the 2019 fiscal year, because tax bills were generally paid on the basis of payments on account. However, this just means that the impact is deferred and will manifest itself in the following year.


Thea Caminada - Director

Deloitte Consulting AG, Zurich
Finance & Performance


Marwan Kosbah - Senior Manager

Deloitte Consulting AG, Zurich
Finance & Performance


Rolf Brügger - Director

Deloitte Consulting AG, Zurich
Business Operations – Government and Public Services


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