Scenario Generation


The challenge of creating alternative scenarios for planning is one that most businesses face. How can this be done in a coherent way that captures the linkages between economic variables? 4most tackles this through its own proprietary economic model. This tool helps incorporate the risks highlighted by our monitoring into economic projections that can be used in the business to forecast its own key metrics.

The insights from our economic analysis are used to feed into general business planning and stress testing, or more specific requirements like IFRS 9 scenarios. Given the scrutiny applied to IFRS 9 and stress testing outcomes, our approach is transparent and audit-friendly by design.


Our scenario generation tool builds on our understanding of risk and allows us to construct scenarios that link the key economic drivers together in a consistent way.  Although the model is complex, the theory behind it is not, allowing clear narratives to be developed and presented. By looking at past forecast errors the model allows us to link probability and scenario severity, removing some of the judgement inherent in the production of IFRS9 scenarios created using other methods. The core model is based on that used by the Office for Budget Responsibility to produce official forecasts, which ensures positive conversations with audit and governance functions.

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Our scenario services work in a flexible way that suits your business. We work with clients to provide scenarios and narratives that suit their individual needs rather than providing off-the-peg numbers.  Most clients take advantage of the chance to have a tailored personal conversation on recent developments and the scenario results.

We offer:

  • Hosted service: We run the model internally and provide you with a set of scenarios each quarter and a presentation that outlines how the forecasts and risks are changing.  We can also run through this presentation at an appropriate internal forum if required
     
  • Bespoke service: You would have full access to our user-friendly scenario generation tool allowing you to run the model directly. As well as standard probability generated scenarios used for IFRS 9, it would provide you with access to other bespoke scenarios and the ability to tweak the assumptions used to generate your own paths.
 

For further information on Scenario generation, please contact our Head of Economic Modelling, Keith Church: keith.church@4-most.co.uk


 
 

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