Worst-case scenario in project management
What is a worst-case scenario?
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
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 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
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.
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
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.