Worst-case scenario in project management

You have ordered materials and are now eagerly awaiting delivery. In this phase of possible imponderables, many thoughts and worries arise: Will the material delivery go smoothly? Will all customs formalities be completed without a hitch? These uncertainties can have an impact on your project. An effective method of freeing yourself from this carousel of thoughts and not having to constantly deal with possible developments is the proactive identification and planning of worst-case scenarios.
Five people brainstorming with notes on glass.


What is a worst-case scenario?

The development of a worst-case scenario is based on thorough data analysis and the consideration of past experience. This process outlines a possible event in order to prepare specifically for possible developments in the future.
A proven method for developing a worst-case scenario is the scenario technique. This involves constructing a hypothetical sequence of events with the aim of focusing attention on the decision-making process. Using this technique, three different scenarios can be developed, allowing you to prepare for a range of possible outcomes.

The different scenarios: Worst-case, best-case and middle-case

The first scenario to be created is the best-case scenario. This forecast is based on very optimistic assumptions and positive developments in order to outline a potentially favourable future situation.
This contrasts with the worst-case scenario, which forecasts the most negative development of a project. This scenario is created using pessimistic assumptions in order to model a situation that is as unfavourable as possible. It makes it possible to prepare for possible difficulties.
The middle-case scenario lies between these two extremes. It represents the expected state of the project, based on plausible and probable developments. It provides a realistic assessment of the project's medium-term future.
All scenarios take realistic events into account in order to ensure comprehensive preparation for all eventualities. While best-case and worst-case scenarios represent two opposing extremes, the occurrence of extremes is statistically rather rare. As a rule, there is a normal distribution, with the most probable event lying in the centre. In the field of project management, these scenarios are extremely useful in order to be warned of possible events at an early stage and to have solutions ready to act in good time. However, there are other positive aspects associated with this approach.

The importance of the worst-case scenario in project management

The use of worst-case scenarios proves to be extremely versatile and helpful in project management. Their flexibility enables the evaluation of a variety of scenarios at a specific point in the course of the project. Targeted measures can be taken on the basis of these assessments, particularly in the context of risk management. Through the process of scenario building, potential risks are identified and analysed, which can lead to the minimisation or even avoidance of these risks through the development of suitable solutions. This helps to protect the company from significant losses and ensure the successful completion of a project.
The importance of this approach is also evident in the decision-making process. If the analysis reveals that a possible scenario and the associated effects are not compatible with the project objectives, the scenario can be avoided or the planning adjusted accordingly. It should be noted that this entails both positive and negative aspects, as was already made clear when scenario avoidance was mentioned. This enables a realistic assessment of the feasibility of the project, the identification of possible alternatives and a focus on developments that have not yet been taken into account.

Strategies for developing and analysing worst-case scenarios

As already mentioned, the scenario technique offers a structured approach for developing worst-case, best-case and middle-case scenarios. This process is based on a thorough analysis of the current project status, including the initial situation and the defined objectives. Based on this, possible factors influencing project development are identified. Neutral indicators, key figures or descriptors are selected for categorisation and definition, whereby descriptors are used specifically to classify or define projects and are based on figures, data, facts and experience.
For each of these descriptors, it is then analysed how it could develop in the future; these possible developments are referred to as projections. These projections should represent different development scenarios. The next phase is to analyse which projections can be combined to create clear and defined scenarios. In this way, several scenarios are created that show different development paths for the project.

The development of a product, especially when material is required, involves various influencing factors, with customs and the associated import of the material being a crucial descriptor. This descriptor gives rise to various projections that represent possible scenarios for project development:
  • All material is detained and may not be imported.
  • The material is detained until the customs duty is paid.
  • Part of the material may be imported.
  • Part of the material may be imported, the other part only against payment of customs duties.
  • Everything may be imported after inspection.
  • No inspection takes place and the material arrives on time. 
The next step is to check how these descriptors fit together to convert them into different scenarios such as worst-case, best-case or middle-case.
It has already been shown that the use of scenarios can serve to treat certain aspects of the project differently, especially if the negative aspects predominate. In this example, the consideration could be to source the material from Germany or Europe. However, this would in turn require new descriptors, projections and scenarios.
Due to the complexity and the large amount of information to be considered, it is easy to lose the overview. Modern software is available to support the analysis. These tools make it possible to compare individual descriptors to determine whether or not they can be combined into a specific scenario. This software facilitates the analysis by helping to recognize correlations more efficiently and improve decision-making.

Avoid pitfalls: When worst-case thinking does harm

Even if the development of scenarios and the search for solutions based on them seems to be a promising approach, there are some important points that should be considered in order to ensure a well-founded analysis:

Holding on to possibilities: It is important to remember that scenarios represent potential developments. The fact that a scenario is possible does not necessarily mean that it will materialise. Excessive adherence to possible scenarios can cause more harm than good in the long term.

Unforeseen developments: Despite extensive planning and consideration of various scenarios, there is always the possibility of unexpected events occurring. In such cases, it is important to draw on experience from similar situations in the past in order to find adequate solutions. This emphasises the importance of continuous learning and the use of knowledge in future projects.

Conscious avoidance of scenarios: Deliberate avoidance of scenarios is possible, but care should be taken to ensure that this does not lead to scenarios being created with the intention of steering the project in a particular direction. Scenarios should be created as a team in order to incorporate objective and diverse perspectives.

Complexity of the process: The process described, especially when using supporting software, is complex and time-consuming. However, this complexity ensures accurate analysis. It is important to consider resources and time appropriately in order to achieve the best possible results.

Conclusion: Balanced consideration of scenarios as the key to success

Like many project management tools, the use of worst-case scenarios requires careful consideration. Creating them is time-consuming, but the benefits can be considerable, especially in the context of risk management. Although scenarios do not predict the future, they do offer the opportunity to recognize possible futures in the present in order to be prepared accordingly. This enables the development of solutions to react flexibly to changing situations. In addition, the use of worst-case scenarios helps to slow down the mental merry-go-round. The need to constantly have all possible developments in mind is reduced. This not only creates clarity, but also enables a more proactive approach to potential challenges. Analysing worst-case scenarios not only offers a preventative approach, but also provides psychological relief for those involved in the project, as they are better prepared for the unexpected.

Worst-case in project management - the IAPM logo
Author: IAPM internal
Keywords: Project management, Worst case

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