Firms often perform scenario analyses in conjunction with finalizing business plans. Explain the concept and the role it plays in addressing risk in planning.

Scenario Analyses

A process of examining and evaluating possible events or scenarios the future could hold and their potential impacts on business operations.

Risk

The exposure to potential financial loss or uncertainty in the outcome of an investment.

Planning

Planning in a financial context involves the process of setting goals, developing strategies, and outlining tasks and schedules to achieve financial objectives efficiently.