scenario-war-room

Scenario War Room

Tier: POWERFUL Category: C-Level Advisory Tags: scenario planning, war room, risk modeling, cascade effects, contingency planning, pre-mortem, crisis simulation

Overview

The Scenario War Room models cascading what-if scenarios across all business functions. Not single-assumption stress tests -- compound adversity that shows how one problem creates the next, and where the cascade can be interrupted. Every scenario produces concrete hedges with costs, owners, and deadlines.

When to Use

• A major risk has probability above 15% and impact above 20% of ARR
• Two or more threats could plausibly co-occur
• A strategic decision has significant downside if wrong
• Board or investors are asking "what's the worst case?"
• Pre-mortem before a major commitment (fundraise, acquisition, market entry)
• Quarterly risk review for leadership team

When NOT to Use

• Single-variable financial sensitivity analysis (use CFO Advisor stress testing)
• Routine project risk assessment (use project management risk frameworks)
• Technical failure mode analysis (use engineering incident planning)

The 6-Step Cascade Model

Step 1: Define Scenario Variables (Maximum 3)

More than 3 variables creates analysis paralysis, not insight. Choose the 3 that actually keep leadership awake at night.

For each variable, specify:

| Field | Description | Example | |-------|-----------|---------| | What changes | Specific, quantified | "Top customer (28% of ARR) gives 60-day termination notice" | | Probability | Your best estimate | 15% | | Timeline | When it could hit | Within 90 days | | Detection signal | How you would know it is happening | Sponsor goes dark, usage drops 25% MoM |

Variable Template:

Variable A: [Specific change]
  Probability: [X]%  |  Timeline: [When]
  Detection: [Early warning signal]
  First-order impact: [Immediate consequence]

Variable B: [Specific change]
  Probability: [X]%  |  Timeline: [When]
  Detection: [Early warning signal]
  First-order impact: [Immediate consequence]

Variable C: [Specific change]
  Probability: [X]%  |  Timeline: [When]
  Detection: [Early warning signal]
  First-order impact: [Immediate consequence]

Step 2: Domain Impact Mapping

For each variable, assess impact across every business function:

| Domain | Key Questions | Typical Impact Areas | |--------|-------------|---------------------| | Finance (CFO) | Burn impact? Runway change? Bridge options? | Cash, runway, covenant triggers | | Revenue (CRO) | ARR gap? Churn cascade? Pipeline affected? | NRR, expansion, new logo risk | | Product (CPO) | Roadmap derailed? PMF at risk? Customer need shift? | Delivery timeline, feature priority | | Engineering (CTO) | Velocity hit? Key person risk? Technical debt impact? | Capacity, architecture, hiring | | People (CHRO) | Attrition cascade? Hiring freeze? Morale impact? | Retention, culture, bench strength | | Operations (COO) | Capacity affected? Process breaks? OKR impact? | SLAs, efficiency, scale | | Market (CMO) | CAC affected? Competitive exposure? Brand risk? | Pipeline generation, positioning | | Legal/Compliance | Regulatory timeline risk? Contract exposure? | Obligations, deadlines, penalties |

Step 3: Cascade Mapping (The Core)

This is the most valuable step. Map how Variable A triggers consequences that amplify Variable B.

Cascade Diagram:

TRIGGER: Customer churn ($560K ARR)
  │
  ├──▶ CFO: Runway drops 14 → 8 months
  │     │
  │     └──▶ CHRO: Hiring freeze imposed
  │           │
  │           └──▶ CTO: 3 open engineering reqs frozen, roadmap slips 2 months
  │                 │
  │                 └──▶ CPO: Q4 feature launch delayed → 2 more customers at risk
  │                       │
  │                       └──▶ CRO: NRR drops → additional churn risk (DEATH SPIRAL ENTRY)
  │
  └──▶ CRO: Revenue concentration increases (next largest = 22%)
        │
        └──▶ Investors: Concentration risk flagged → Series A terms worsen

Name the cascades explicitly. Common cascade patterns:

| Cascade Pattern | Description | Interruption Point | |----------------|-------------|-------------------| | Revenue-to-Runway Death Spiral | Customer churn → lower runway → hiring freeze → slower product → more churn | Emergency revenue diversification | | Key Person Cascade | Star leaves → team morale drops → followers leave → velocity collapses | Retention bonuses before departure | | Market Squeeze | Competitor raises → price war → margins compress → can't invest in product | Differentiation, not price matching | | Trust Cascade | Incident → customer concern → churn → press → more churn | Swift, transparent communication | | Fundraise-Burn Spiral | Miss target → raise delayed → bridge at bad terms → burn cuts → team loss | Parallel fundraise tracks |

Step 4: Severity Matrix

Model three scenarios with increasing severity:

| Scenario | Variables Hit | Definition | Recovery Difficulty | |----------|-------------|-----------|-------------------| | Base | 1 of 3 | Single shock, others don't materialize | Manageable with prepared response | | Stress | 2 of 3 | Compound shock, cascade begins | Requires significant pivot, board involvement | | Severe | All 3 | Full cascade, existential territory | Requires emergency action, may need board intervention |

For each severity level, quantify:

BASE SCENARIO (Variable A only):
  Runway impact: [X] months → [Y] months
  ARR impact: -$[X] ([Y]% of total)
  Headcount impact: [freeze / reduction / none]
  Timeline to critical: [X] months
  Recovery plan: [specific actions]

STRESS SCENARIO (Variables A + B):
  Runway impact: [X] months → [Y] months
  ARR impact: -$[X] ([Y]% of total)
  Headcount impact: [specifics]
  Timeline to critical: [X] months
  Recovery plan: [specific actions]

SEVERE SCENARIO (All three):
  Runway impact: [X] months → [Y] months
  ARR impact: -$[X] ([Y]% of total)
  Headcount impact: [specifics]
  Timeline to critical: [X] months
  Existential: [yes/no]
  Emergency plan: [specific actions requiring board approval]

Step 5: Early Warning Signals (Trigger Points)

Define measurable signals that tell you a scenario is unfolding BEFORE it is confirmed. The value of this exercise is acting early, not reacting late.

Signal Design Criteria:

• Observable (you can actually measure it)
• Leading (appears before the full impact)
• Specific (not just "things feel off")
• Actionable (triggers a specific response)

| Variable | Signal | Threshold | Response | |----------|--------|-----------|----------| | Customer churn | Sponsor stops responding | > 3 weeks silence | Exec escalation, QBR request | | Customer churn | Usage drops | > 25% MoM decline | CS outreach, value review | | Fundraise delay | Term sheets | < 3 after 60 days in process | Parallel bridge conversations | | Fundraise delay | Investor requests | > 30 day DD extension | Reduce burn, extend runway | | Key person departure | Market compensation | Counter-offer required in last 90 days | Retention package, succession plan | | Key person departure | External engagement | Engineer presenting at conferences for competitors | Direct conversation, role expansion |

Step 6: Hedging Strategies

For each scenario: actions to take NOW (before the scenario materializes) that reduce impact if it does. Hedges have costs -- the goal is cheap insurance, not paranoia.

Hedge Evaluation Criteria:

| Criterion | Question | |-----------|----------| | Cost | What does this hedge cost to implement? | | Reversibility | Can we undo it if the scenario doesn't happen? | | Lead time | How long to implement? (Must be shorter than detection-to-impact window) | | Coverage | Which scenarios does this hedge protect against? | | Side effects | Does this hedge cause other problems? |

Hedge Table Template:

| Hedge | Cost | Protects Against | Owner | Deadline | Status |