Using Scenarios to Convey Financial Guidance

In an uncertain economic environment, scenarios represent a useful tool for communicating guidance.

The problem is that scenarios are not part of the typical quarterly guidance package. Therefore, the initial reaction of many is that scenarios represent a bridge too far.

Scenarios: Two Things to Consider
1. Keep them simple.
2. Do not feel compelled to provide the exact final performance number.

The key to keeping scenarios simple revolves around good bridges that provide the two to three directional building blocks of your guidance target.

The key to a good simple scenario, without providing the exact target number, revolves around providing basic information on how the building blocks in the bridge may move up or down.