FSG News

Scenario Projects, FSG People, and Current Events

April 2009

FSG INTRODUCES THE RECESSION/RECOVERY DECISION MATRIX^sm …

How to make the right decision amid turbulent change and widespread uncertainty: This is the challenge that executives are struggling with today. Quantitative models and traditional risk management tools fail in an environment of confounding complexity and unprecedented events. Nobel laureates in Economics agree on neither the causes nor the way out of the current predicament. All of this should serve as a warning against depending upon any single interpretation of events or any “most likely” scenario for planning. Firms need to contemplate a range of plausible recession scenarios.

In response, FSG has crafted a new tool to help executives anticipate the wide range of alternative potential future operating conditions, and to execute plans that promise to work no matter how the future actually turns out. The tool is called the Recession/Recovery Decision Matrix^sm (R/RDM), a set of four scenarios that capture a broad range of alternative business environments for the years 2009-11. This is the shortest planning horizon FSG has ever created in a scenario planning project – in recognition of the fact that for many firms looking beyond the very short term is difficult to justify at the moment. Each of the R/RDM recession scenarios presents a strikingly unique “world” of policy direction, economic outcomes, financial conditions, regulatory priorities and global issues. In addition, each of the recession scenarios is customizable, so users can inject industry content or firm-specific considerations to maximize relevance and utility for business planning, risk management or even forecasting.

For more information and to download a brochure describing the R/RDM recession scenarios, please click here, or contact Peter Kennedy.

R/RDM APPLICATION IN FINANCIAL SERVICES RISK MANAGEMENT …

Banks, brokerages, exchanges and insurance companies face a range of special management challenges resulting from the financial crisis: wholly redefined markets, new structures of ownership, tougher expectations for governance, and of course, the potential for massive government intervention and control. FSG and its partners Collective Intelligence and Board Advisory Services are customizing the R/RDM scenarios for financial service industry clients, to provide them with realistic backdrops for business planning, risk management and opportunity identification. Downstream from the scenario planning process, the three firms are creating customized dashboards for ongoing event tracking. The goal is to anticipate changes in external market conditions that might justify course changes in what will continue to be a dynamic business environment over the next few years.

UPDATES ON THE ARCTIC FUTURES INITIATIVE ...

As the Obama administration nears the end of the symbolically important 100 day mark, it’s significant that polar issues are moving off the back burner and becoming a greater policy priority. At an international conference in early April, Secretary of State Hillary Rodham Clinton noted both the environmental risks and economic opportunities related to the melting of glaciers and the opening of new navigation routes in the Arctic. She reiterated the Obama administration’s commitment to having the U.S. Congress accede to the 1982 Convention on the Law of the Sea.

FSG and Rhumb Line LLC, partners in the Arctic Futures Initiative, are keeping their Arctic scenarios updated as events unfold. Moreover, AFI principals are playing a part in shaping U.S. and global policies. Dr. Scott Borgerson recently co-authored (with Caitlyn Antrim of the Rule of Law Committee for the Oceans) an Op Ed in the New York Times titled “An Arctic Circle of Friends.” Also in March, Scott testified before the House Committee on Foreign Affairs on the subject of U.S. national security interests in the Arctic. (Click here to download a copy of Dr. Borgerson’s testimony.) Finally, Scott’s latest geopolitical assessment of the changing Arctic appears online in Foreign Affairs. On the Arctic business front, Dr. Rockford Weitz was heavily quoted in the March 19, 2009 Investor’s Business Daily feature story on the economic implications of the melting ice cap. He notes that moving cargo from China or Japan to Europe over Russia’s Arctic Sea route could lop nearly a quarter off traditional shipping routes.

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