Conceptual Model of Scenario Analysis of Enterprise Financial Decisions

Abstract

The purpose of the study is to develop a conceptual model of scenario analysis of a company's financial decisions that integrates structural blocks, a sequence of stages, and requirements for information support of managerial decision-making under conditions of high uncertainty and risk. The paper substantiates the need to move from reliance on a single "baseline forecast" to a multi-scenario approach capable of capturing the range of possible financial outcomes and enhancing the firm's resilience to shocks. The theoretical premise of the research is the identified contradiction between the increasing complexity of financial decisions and the simplified methods used to justify them, which ignore the impact of key drivers of uncertainty. The methodological framework is based on systems and structural-logical approaches that treat scenario analysis as a holistic process within the enterprise financial management system. Methods of theoretical generalisation, content analysis of scientific publications, and elements of cognitive modelling are applied to formalise relationships between uncertainty factors, financial indicators, and managerial decisions. The paper offers an original interpretation of scenario analysis of financial decisions as a methodological approach whereby the future state of the firm and its environment is described through a limited number of internally consistent scenarios that differ in combinations of key factors and the corresponding financial results. A conceptual model is proposed that comprises five interrelated blocks: definition of the managerial problem and financial decision; scenario formation; financial modelling; interpretation of results and choice of alternative; feedback and scenario updating. For each block, the content, input and output information, main analytical tools, and the logic of transition from qualitative managerial assumptions to quantitative estimates of cash flows, investment performance, liquidity, and financial stability are determined. It is shown that scenario analysis occupies an intermediate but system forming position between forecasting, sensitivity analysis, and stress testing. Structuring the scenario analysis process within the conceptual model creates a methodological basis for its implementation in the enterprise financial management system, ensuring a transparent transition from scenario calculations to managerial decisions and strengthening the adaptability of the financial system to shocks in the long run.