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Scenario library
Ten scenarios every CFO should have ready
Each scenario gives you the trigger to watch for, the first move to make, and practical plans for the first day, week and month.
CATEGORY A
Demand
SCENARIO 1
Demand Drops Sharply
- Trigger
- Sales orders or pipeline coverage fall for two consecutive periods.
- First move
- Protect cash, revise forecasts, understand what has changed in demand and protect your most valuable customers.
SCENARIO 2
Loss of a Key Customer
- Trigger
- A major customer reduces activity, delays renewal or indicates they may leave.
- First move
- Quantify the revenue, margin and money-owed exposure, then build a realistic plan to retain or replace them.
CATEGORY B
Pricing & Cost
SCENARIO 3
Price Pressure
- Trigger
- Competitors reduce prices or customers resist increases.
- First move
- Before you discount, calculate how much extra volume you'd need to sell to make the same contribution.
SCENARIO 4
Input Cost Shock
- Trigger
- Supplier, wage, energy, freight or material costs increase materially.
- First move
- Quantify the margin impact, then evaluate passing it on, substituting or managing the cost.
CATEGORY C
Supply & Currency
SCENARIO 5
Supply Disruption
- Trigger
- A critical supplier, route or facility becomes unavailable.
- First move
- Map your exposure, identify substitutes and protect your most essential operations and customers.
SCENARIO 6
Currency Swing
- Trigger
- Exchange rates materially affect your costs or overseas income.
- First move
- Calculate your net foreign currency exposure and review your existing risk-management arrangements.
CATEGORY D
Capital & Liquidity
SCENARIO 7
Funding Delayed or Tightened
- Trigger
- Funding arrangements are delayed, withdrawn or made more restrictive.
- First move
- Prepare a 13-week cash flow forecast and identify realistic short-term liquidity actions.
SCENARIO 8
Covenant Headroom Shrinks
- Trigger
- Forecast financial ratios approach your lender's covenant thresholds.
- First move
- Quantify the headroom, stress-test the forecast and engage your lender early.
CATEGORY E
Execution
SCENARIO 9
A Deal Slips or Fails
- Trigger
- A planned acquisition, sale, investment or major agreement fails to complete.
- First move
- Reforecast without the transaction and revise commitments and priorities that depended on it.
SCENARIO 10
Operational or Cyber Incident
- Trigger
- A major outage, fraud incident or cybersecurity event interrupts important operations.
- First move
- Activate your incident response process, protect systems, escalate responsibly and identify cash and operational exposure.