Auditing the Future
While strategy is a vision of how to win the future, much of the audit committee’s work deals with monitoring past performance against pre-existing standards and expectations. This effort gives an important edge for behavior monitoring, but does it give us control over plans or intentions for the future? What if we could foresee and audit events before they happen? How can we pass judgement on something that is still only a sparkle in someone’s mind? Where would we begin auditing the future?
If strategy represents a plan for the future, then scenarios can be used to test the viability of that strategic plan in a range of possible and plausible future contexts. Strategic decisions are made in accordance to situational context. Not too long ago, you looked out the window before you headed out the door and reacted by grabbing your umbrella or rain slicker. It probably does not qualify as a decision, but it would be an example of scenario planning in a rudimentary form.
We test our tactics and strategies and modify our behavior against hypothetical scenarios all the time. However, when most of us make an effort to really look into the future, we do not get much past the window. The looming uncertainties of the future are difficult to explore because most of us lack a comprehensive and systematic approach, as well as the structured discipline necessary to undertake an adequate exploration of the complexity.
Yet exploration of the future deserves a better effort: Google has found a positive correlation between societies that take more time to search about the future and wealth in that particular society. Perhaps, then, better capabilities of exploring the future with our mind’s eye would result in the extraction of more value: By understanding the deeper consequences of the possible contexts of the future in which our strategies will be judged, we set ourselves up for increased opportunities of success.
Taking time to build strategies brings us closer to the future. We build upon what we know from our experiences, fill in the gaps of what we don’t know, and make our best attempt to configure structures, resources, networks, and initiatives to optimize our position for future gain. Diciplined strategic scenario planning enables us to remain in contact with the future longer and more effectively, and the better we practice future foresight, more often we will get it right.
If executives are accountable to the board for their performance, and boards are accountable to the owners to ensure the organization’s ongoing success, then strategies for the future should be considered carefully, together. Through scenario planning, the audit committee can offer executives a future-oriented stress-test to uncover risks and define measures to protect against the pitfalls that will be inherent in different operating contexts. Auditing the future through scenario planning helps organizations to collaborate in developing agile, robust, and resilient strategies and achieving success in the long-, medium-, and short-term.
We are amidst an era of uncertainty and desperate times call for drastic measures. As the pressure mounts in tough times, the average CEO tenure gets shorter. Scenario analysis–backed by the audit committee–can provide a safe space for a more comprehensive vetting of ideas and constructively help executives to be better at what they are paid to do: Think.