Brian Stauffer
Organizations everywhere are finding it ever more challenging to navigate uncertainty in a fast-changing world. For central banks, which serve as the bulwarks of every nation’s economic stability, the ability to anticipate future risks and opportunities is particularly critical to making deeply consequential decisions.
Indeed, many central banks were born in response to upheavals as profound as — and challenges as novel as — those facing business leaders today. In 1608, the Bank of Amsterdam, the forerunner of what we now call central banks, was formed to counter debasement of coinage and facilitate international payments for burgeoning foreign trade. In 1668, to restore trust in the financial and monetary system following the collapse of Stockholms Banco and the resulting financial crisis, Sweden founded the world’s first central bank, the Riksbank. And in 1694, the Bank of England was founded to help finance the country’s Nine Years’ War with France.
“The Old Lady of Threadneedle Street,” as the bank is affectionately nicknamed, began as a private institution with note-issuing privileges, which it received in return for raising funds for the government. Over time, it gradually took on the key functions of a modern central bank, such as setting and implementing monetary policy, ensuring a stable financial system as lender of last resort, regulating financial institutions, and facilitating interbank settlements. Today the bank is publicly owned and operates within a remit set by the government; debt management is handled by a separate agency, the Debt Management Office. In common with its central banking peers, the bank’s main role is to act as guardian of monetary and financial stability in the economy.
Central banks’ functions are underpinned by structured and quantitative risk management frameworks to protect balance sheets and ensure policy credibility. Traditionally, they have focused on areas such as credit and market risk controls, operational risk mitigation, policy risk monitoring, and strategic reserves and liquidity buffers. These activities seek to ensure that there are suitable plan B options and that there is enough liquidity, capital, and other shock-absorbing capacity to mitigate shocks to banks and prevent them from amplifying and becoming systemic.
But in today’s global environment, characterized by turbulence, uncertainty, novelty, and ambiguity (the TUNA paradigm), traditional risk management frameworks are increasingly stretched and challenged. The frequency and severity of recent shocks to the global financial system have underscored the need to consider complementary approaches that identify both risks and opportunities in a coherent, agile, and dynamic framework. And central bankers increasingly have to think about trends outside of traditional economics and finance domains; recent examples include pandemics, artificial intelligence, climate change, and geopolitics. This external environment invites an adaptive and forward-looking approach to risk management — one that is resilient to volatility, responsive to emerging threats, and agile in the face of change — alongside more traditional approaches.
Scanning the horizon for risks has always been an important activity for many teams at the Bank of England. But in 2023, the bank took its first steps toward introducing a more formal strategic foresight practice for its executives and committees. This was spurred by Sarah Breeden, then executive director for Financial Stability, Strategy, and Risk and now deputy governor for financial stability. Breeden sought to give the Financial Policy Committee (FPC) time and space to discuss work that wasn’t business as usual and articulated the need for “something that looks outwards and upwards, heterodox, provocative, even.”
Finding a Common Language
Safeguarding financial and monetary stability is a complex business, not least due to the interconnectedness of the financial system, which in the U.K. is a vast and closely intertwined network of banks, insurance companies, markets, and nonbank financial institutions. Because of the interconnectedness, a shock (such as a loss of confidence in one sector or a cyberattack) could potentially destabilize the entire system. Thus, Bank of England staff members monitor vast data sets — from credit markets to household debt — and use analytical frameworks to spot vulnerabilities and understand how the economy and financial system behave under stress. Members of the bank staff also regularly talk to market participants to gather intelligence, including on emerging risks. Moreover, the central bank conducts annual stress tests on major U.K. banks to simulate adverse economic conditions. These tests assess capital adequacy and systemic resilience, helping to preempt financial disruptions. Their results are reported up to the FPC, whose mandate is to identify, monitor, and reduce systemic risks to financial system stability.
Monetary policy, the bank’s other mandate, requires forecasting. The Bank of England’s Monetary Policy Committee sets interest rates to maintain price stability, which involves analyzing macroeconomic indicators like gross domestic product, employment, and inflation expectations. The bank uses economic models and tools that produce forecasts and quantitative scenarios to predict how changes in policy will affect the economy and, in particular, price inflation.
All in all, the Bank of England’s decisions affect millions of people and businesses, and the bank is accountable to Parliament and to the general public. Thus, its decisions must be justifiable, transparent, and grounded in evidence; that is to say, analytical rigor ensures that policies are not based on intuition or politics but on quantifiable insights.
But in the TUNA world of today, the way in which the bank traditionally manages risks has to evolve to deal with newer threats, such as algorithmic trading, cyberattacks, climate risk, and geopolitical shocks. One of the methodologies that allowed us to broaden our approach, as Bank of England employees focused on strategy and risk assessment, is strategic foresight. This involves exploring multiple plausible futures (such as geopolitical realignments or unexpected resource constraints) to anticipate global economic shifts and policy challenges. (See “Why the Future Is Difficult to Predict in a Turbulent Environment.”)
The foundation of strategic foresight is creative storytelling based on structured narratives — offering a complementary lens to the organization’s more common analytical and data-driven methods. Introducing this new way of constructing knowledge in the bank meant inviting colleagues to engage with uncertainty in new ways. This was not always comfortable: While data analytics seeks precision and predictability, strategic foresight embraces ambiguity and possibility.
In the initial phase of socializing strategic foresight, we talked to many colleagues and together explored thinking in a different way, particularly about multiple plausible futures. We learned that to get buy-in, we first had to find a common language so that we could convey to colleagues that foresight complements data by illuminating blind spots, challenging explicit and implicit assumptions, and expanding the strategic aperture beyond what numbers alone can reveal.
We aimed to show that although our approach was different, it shared the rigor and many features of the bank’s other work. We emphasized that while the scenarios presented were constructed through narrative logic rather than statistical inference, the underlying process was grounded in systematic analysis. Each scenario was derived from a comprehensive sector risk assessment, in which we evaluated the risk, probability, and impact scores of emerging trends across key systemic sectors. This analytical foundation ensured that the narratives were both plausible and strategically relevant.
Collaborating with colleagues across the bank to develop the sector risk analysis and cocreate scenarios aligned with organizational objectives was a critical component of the process. Feedback from participants highlighted that engaging with these scenarios was not only intellectually stimulating but also offered a valuable opportunity to reframe their work through new perspectives. Importantly, the exercise reinforced the understanding that strategic foresight is complementary to existing analytical frameworks rather than a competing paradigm.
Horizon Scanning in Practice
While strategic foresight, also referred to as longer-term horizon scanning in the bank, is gaining traction across the organization, its application is still evolving. As noted by an evaluation of horizon scanning that was conducted by the bank’s Independent Evaluation Office (see “Evaluating Our Practice”), it is also characterized by decentralized approaches and considerable variation in practice across areas. Let’s take a look, from an organizational perspective, at the horizon-scanning work undertaken in support of the FPC and its mandate to identify, monitor, and take action to remove or reduce systemic risks.
Building on the foundations established in 2023, our work progressed through a broad spectrum of external engagements, including presentations, workshops, conferences, and formal training — most notably the Oxford Scenarios Programme at the University of Oxford’s Saïd Business School. We brought external experts into the bank to exchange insights and stimulate constructive dialogue. Learning from other organizations that were further along on this journey helped us build conceptual alignment externally and credibility with our internal stakeholders. Sharing these organizations’ experiences helped colleagues understand how this approach — thinking in terms of plausibility instead of probability, and engaging in reframing and re-perception — and the concept of strategic foresight itself could supplement their other work.
Using the Oxford approach to mapping out the domain of inquiry provided a strong visual reference for the work that could be easily understood by those who were unfamiliar with the practice. The work of determining, as a group, what entities make up an organization’s transactional environment and what factors are important to shaping its contextual environment is itself key to building shared understanding.
This targeted horizon-scanning effort, grounded in sectoral risk analysis and shaped through broad engagement, culminated in a scenario development process aligned with the bank’s financial stability mandate. By combining analytical rigor with strategic imagination, the work has provided policy makers with another lens through which they can test the resilience of their toolkit. The bank is able to explore plausible futures via the use of scenarios, test assumptions, and anticipate a wide variety of systemic risks. The scenarios prompted substantive discussions around the exploration of divergent futures and the stress-testing of underlying assumptions. A key outcome was a discussion about medium-term priorities that was based on an outward-looking and strategically adaptive approach.
Insights From Our Journey
Building trust in strategic foresight required a deliberate and inclusive approach. As described above, we anchored our work in common language and established frameworks and a trusted methodology — specifically, our sector risk analysis — as a credible starting point. By engaging with a range of people across the organization who brought different experiences, skills, and perspectives, we fostered confidence and openness toward this new way of thinking. Colleagues particularly valued the creativity and collaboration inherent in working with strategic foresight methodologies.
Key principles that underpinned our approach included:
- Openness to challenge and collaboration. We created space for constructive dialogue, inviting scrutiny and cocreation to ensure relevance and credibility.
- Iterative refinement based on engagement. As we engaged with colleagues, we continuously refined our scenarios to reflect the priorities and interests of different areas. This responsiveness was instrumental in securing buy-in.
- Persistent and targeted stakeholder communication. We maintained consistent dialogue with stakeholders by running scenario engagement workshops and, importantly, recognizing that traditional methods of assessing risk remain important. Strategic foresight was positioned as a complementary tool that enhances existing planning and decision-making processes.
Our experience showed that embedding strategic foresight within an organization grounded in analytical rigor requires engagement, clarity of purpose, and the ability to build trust and relevance across teams. We were helped in this effort by our structure: A small, focused team of three led the initiative, but the rollout was amplified through a wider network of internal stakeholders and senior leaders. This structure enabled agility while ensuring broad ownership and visibility. We are considering how to strengthen connections between horizon-scanning practitioners across the bank based on recommendations that arose from an evaluation by the bank’s Independent Evaluation Office.
We used an informal channel — our internal social media platform — to share the momentum behind and potential of strategic foresight, highlighting how emerging trends and aspects of the scenarios aligned with colleagues’ priorities and challenges. This helped establish relevance and foster curiosity and a sense of common purpose. We disseminated key documents, such as meeting notes and presentation materials, via an internal website to help bring colleagues along on our journey, creating a shared direction of travel.
We also ensured that our scenarios reflected human experiences and emotional depth. This reflects a core principle of strategic foresight: developing narratives that resonate personally and intellectually, supported by visual tools such as magazine covers “from the future.” In this way, we enriched conversations, enabling colleagues to explore familiar issues from new perspectives and to test assumptions.
Based on our experience, we conclude that strategic foresight — when grounded in qualitative insight and meaningful stakeholder engagement — can significantly enrich policy deliberation. This approach is especially valuable in contexts defined by uncertainty, complexity, and rapid change. While it can be difficult to measure explicit outcomes of the application of the methodology, the discussions themselves serve a key purpose: to open people’s minds to alternative outcomes, away from more standard assumptions.
Moreover, from an organizational perspective, strategic foresight work has significantly contributed to the development of social capital — deepening interpersonal connections, cultivating trust, and enhancing the organization’s capacity for cross-functional collaboration. Exercises in this space support working across boundaries, which the bank actively encourages. This is particularly vital in a TUNA environment, where crises can emerge rapidly and from unforeseen directions. In such contexts, it is essential that colleagues share a common organizational language. When these conditions are met, even the most challenging conversations can be navigated more effectively under the pressure of real-time decision-making.