What will the future look like? And what are the best companies doing to prepare for it?
Pamela Craig, who sits on the board of directors for Progressive, Corning, Merck, and 3M, wrapped up a panel at a leadership roundtable in New York last month with that prompt. Long-term forecasts, she said, have to take into account a long list of business horrors: ongoing inflation, a potential recession, wobbly supply chains, labor challenges, and a weak global economy.
Craig was asking the right room. The event, co-produced by the Women Business Collaborative and board software maker Diligent, which sponsors this newsletter, brought together prominent directors. Scenario planning—an exercise that asks businesses to react to a range of potential future outcomes—emerged as the preferred tool to help boards cope with a barrage of challenges.
“One thing the pandemic taught us is how to manage through uncertainty, and scenario planning was a big part of that,” said Paula Price, who sits on the boards of Accenture, Bristol Myers Squibb, and Warner Brothers. In recent months, the boards she serves brought in former defense secretaries and other experts for context on macro events like global inflation and the Ukraine-Russia conflict. One benefit of holding virtual meetings is that it makes booking top speakers easier, she noted.
Tonie Leatherberry, a director at American Family Insurance and veterinary drugmaker Zoetis, said the insurance company has brought in weather experts to discuss climate change scenarios.
Relatedly, Lisa Edwards, Diligent Institute’s president and COO, who sits on Colgate-Palmolive’s board, urged companies that haven’t held a thoughtful conversation about the most severe threats to their operations to do so. “We have enterprise risk matrices for a reason,” she said.
Boards should assess their portfolio of products and services and “push on all the tipping points” to find weaknesses, then cull as necessary, added Maria Morris, a board member at Wells Fargo and S&P Global.
Global diversification is essential right now, said Mary McDowell, chair of the board at Mitel, and board member at Autodesk, and the U.K.-based ed-tech firm Informa. During the U.K.’s economic freefall earlier this fall, she said, Informa was able to tell investors, "We are a global company, so we are impacted, but it's not wiping us out.”
Scenario planning, however, was the most commonly cited tool to help boards respond quickly to unknown circumstances. Moreover, it takes the emotion out of a corporate response because leaders can refer back to scenario-planning results to justify their actions, Craig said. “It’s like, ‘We said we were going to do this if this happens, and that’s what we’re going to do.’”
Lila MacLellan
lila.maclellan@fortune.com
@lilamaclellan
