An Evaluation of the Role of Scenario Planning in Business Risk Mitigation: A Case Study of Financial Institutions in Plateau State
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Background of the Study
Scenario planning is a strategic management tool used to visualize and prepare for multiple future possibilities by considering various external factors and uncertainties. For financial institutions, where risks such as market volatility, regulatory changes, and economic shifts can significantly affect performance, scenario planning helps in formulating strategies to manage these risks (Oloyede & Abubakar, 2024). In Plateau State, financial institutions face unique challenges due to regional economic dynamics and political factors, making scenario planning a valuable tool for risk mitigation.
This study will evaluate how scenario planning is used by financial institutions in Plateau State to anticipate potential risks and create strategies to mitigate them (Saleh & Ibrahim, 2023).
Statement of the Problem
Despite the increasing use of scenario planning in strategic decision-making, its effectiveness in risk mitigation for financial institutions in Plateau State remains underexplored. Financial institutions in this region face multiple risks, including credit, operational, and systemic risks, and it is critical to understand how scenario planning can enhance their ability to anticipate and mitigate these risks (Tijani & Ibrahim, 2024).
Objectives of the Study
- To evaluate the role of scenario planning in mitigating risks for financial institutions in Plateau State.
- To assess how scenario planning impacts the resilience and performance of financial institutions in the face of external uncertainties.
- To identify best practices in scenario planning for risk mitigation in the financial sector in Plateau State.
Research Questions
- How is scenario planning implemented in financial institutions in Plateau State?
- What role does scenario planning play in mitigating risks for financial institutions in Plateau State?
- What are the key challenges financial institutions in Plateau State face when implementing scenario planning?
Research Hypotheses
- Financial institutions in Plateau State that employ scenario planning have better risk mitigation outcomes than those that do not.
- Scenario planning helps financial institutions in Plateau State improve their preparedness and response to external economic shocks.
- The effectiveness of scenario planning in risk mitigation is influenced by the level of expertise and resources available to financial institutions in Plateau State.
Scope and Limitations of the Study
This study will focus on financial institutions in Plateau State and examine the use of scenario planning for risk mitigation. Limitations include the potential difficulty in obtaining confidential risk management data from financial institutions, as well as potential biases in responses from senior management involved in scenario planning processes.
Definitions of Terms
- Scenario Planning: A strategic planning method used to anticipate and prepare for various possible future scenarios by identifying external risks and uncertainties.
- Business Risk Mitigation: The process of identifying and minimizing potential risks to reduce their negative impact on business operations.
- Financial Institutions: Organizations such as banks, insurance companies, and investment firms that provide financial services to customers.
- External Uncertainties: Factors outside of an organization’s control, such as economic changes, political shifts, and market fluctuations, which can affect its operations and performance.
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