RISK5002 Chap.6 Scenario Analysis and the Delphi Technique
Scenario Analysis and the Delphi Technique
Scenario analysis builds plausible pictures of the future and works through their implications. Short-term work explores what follows an initiating event such as an emergency, while long-term work imagines credible futures decades ahead, like the IPCC socioeconomic pathways, without assigning probabilities. Its outputs are scenario stories, effects of plans under each future, emerging risks and leading indicators.
The Delphi technique gathers expert judgement through anonymous, iterative questionnaires until consensus forms, which protects against groupthink. This chapter covers both techniques under the IEC headings, summarises two Delphi rounds with a median and range, and practises the past question on how actuaries could use Delphi. Both techniques help when the future cannot be read from past data.
Scenario analysis widens the range of futures an organisation prepares for, while Delphi narrows expert opinion towards an agreed estimate.
The chapter compares their uses across business, finance, climate, technology, emergency planning and engineering, explains the lecture's aircraft inspection case in which Delphi produced human error probabilities, and shows how the wisdom of crowds depends on the same diversity and independence that Delphi protects.
What this chapter covers
- 01
Plausible scenarios and their implications
- 02
Short-term versus long-term horizons
- 03
Outputs and leading indicators
- 04
Delphi steps and anonymity
- 05
Groupthink and the wisdom of crowds
- 06
Delphi for scarce-data estimates
Worked example · free
Summarise two Delphi rounds on a strike probability
- +1Round 1: the median is the fourth sorted value, 15%; the range is 40 minus 5, or 35 points.
- +1Round 2: the median stays at 15%; the range falls to 20 minus 10, or 10 points.
- +1The centre held while the spread narrowed by 25 points, so the panel is converging.
- +1Report 15% with a 10 to 20% band and the reasons outliers gave, then stop unless a tighter band is needed.
Key terms
- Scenario analysis
- Techniques that model how the future might unfold and trace each scenario's risks.
- Leading indicator
- An early signal that a particular scenario is starting to emerge.
- Groupthink
- Acceptance of a perceived group consensus without critical evaluation.
- Consensus
- Agreement among panel members reached through successive rounds of anonymous estimates.
Scenario Analysis and the Delphi Technique FAQ
When should I use long-term scenario analysis?
Use it when an organisation must prepare for major shifts in technology, preferences or social attitudes over decades. Probabilities cannot be attached to such futures, but their consequences can be explored to build resilience and to choose indicators worth monitoring.
Why are Delphi responses anonymous?
Anonymity lets each expert answer independently, so senior or confident voices do not dominate and the panel avoids groupthink. Panellists still see the combined results and can revise their views in later rounds.
What are the weaknesses of scenario analysis?
It can be speculative and produce unrealistic results, and long-range scenarios seldom materialise in the form they were drawn. Its value lies in preparing for a range of futures rather than predicting one.
What makes a Delphi panel produce good estimates?
Quality depends on choosing experts who genuinely know the problem, calibrating them on the topic, asking clear questions and keeping responses anonymous and independent. Each round should circulate a fair summary with the reasons behind outlying views. A diverse, well-informed panel benefits from the same conditions that make crowds wise, while a narrow or ill-informed one can converge on a poor answer.
Exam move
For scenario analysis, practise naming the horizon first and then listing the four outputs for a case of your choice. For Delphi, rehearse the steps in order and run a small exercise with friends, summarising each round with a median and range. Prepare a short paragraph on how actuaries or any data-poor profession could use the method, ending with its main limitation.
Prepare one example of each scenario horizon from a field you know, ready to adapt in an exam, and practise explaining in two sentences why anonymity distinguishes Delphi from a workshop or brainstorming session.
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