The right response to uncertainty is not to wait for certainty; it is to know which decisions change when the environment changes.
External shocks rarely ask permission before entering a business case. Political instability can interrupt trade. Inflation can change cost structures. Financing conditions can tighten. A pandemic can affect schedules, lenders and supply chains. Regulation can alter the economics of an asset before construction is complete.
These events are often treated as project risks to be logged and monitored. Some are much larger than that. They can change the strategic attractiveness of entire markets, invalidate portfolio assumptions or threaten business continuity.
The supplied HBR article by Ben Laker and Thomas Roulet distinguishes uncertainty affecting economic conditions from uncertainty severe enough to threaten continuity. Their framework then differentiates strategic responses according to both the severity of uncertainty and the growth characteristics of the market. The supplied 2020 GlobalData article provides a narrower historical illustration: during the early COVID-19 period, renewable-project financing was expected to face lender caution, higher debt pricing, refinancing pressure and schedule exposure.
The Strategic Context
Business cases are snapshots of assumptions. Markets, costs, financing, regulations and operational conditions are translated into expected cash flows and delivery plans. Once capital is committed, however, those assumptions continue to move.
The strategic challenge is greatest when uncertainty affects multiple parts of the system simultaneously. A political shock may weaken demand, interrupt supply and change currency values. A financing shock may increase interest expense precisely when revenue is delayed. A regulatory change may reduce market attractiveness while increasing compliance investment.
The question is therefore not whether external uncertainty exists. It is whether the portfolio and operating model are designed to respond before uncertainty becomes irreversible loss.
What Leaders Commonly Misread
The first misreading is paralysis. Leaders postpone decisions because they believe uncertainty must resolve before action becomes rational. Waiting can be a valid option, but only when the value of additional information exceeds the cost of delay and the organisation retains the ability to act later.
The second is extrapolation. A stable past is extended into the future even though the drivers of stability are changing. Historical data remains useful, but structural uncertainty requires scenarios that allow relationships themselves to change.
The third is treating all uncertainty as downside. External disruption also reallocates opportunity. Competitors may freeze investment, customer needs may change, assets may become cheaper or new policy settings may create demand. Resilience includes the ability to exploit favourable dislocation, not only survive adverse conditions.
The fourth is creating one universal response. The HBR framework shows why this is weak. The rational action depends on both the severity of uncertainty and the strategic position of the market. A defensive move that protects a mature business may unnecessarily surrender growth in an attractive market.
Reframing the Issue
External uncertainty should be treated as a portfolio adaptation problem.
Leaders need to know which assets and capabilities are exposed, which assumptions are common across initiatives, which commitments are reversible and where the organisation has options to shift resources.
This is more useful than asking whether the forecast is still 'right'. A forecast will inevitably be wrong in detail. The strategic question is whether the organisation has prepared credible responses for materially different states of the world.
Strategic Analysis: Four Adaptive Postures
The supplied HBR article uses four response labels in the context of political uncertainty: hedging, salvaging, rebalancing and shifting. They can be interpreted more broadly as different degrees and directions of resource reallocation.
Hedge
Where uncertainty is material but continuity remains intact, leaders can reduce exposure while preserving participation. This may mean diversifying suppliers, adjusting inventory, spreading capacity or protecting critical functions.
Salvage
Where continuity is under serious threat in a weak market, the priority becomes preserving the assets and capabilities required to survive and recover. This is not indiscriminate cost cutting. It is selective protection of future option value.
Rebalance
Where growth remains attractive but one geography or operating configuration becomes less favourable, resources can be moved towards more resilient growth engines while maintaining strategic participation.
Shift
Where business continuity is fundamentally threatened and better alternatives exist, more decisive relocation or reallocation may be justified. Because shifting is more costly and difficult to reverse, the evidence threshold should be higher.
These are not mechanical categories. Their value is in forcing leadership to connect environmental conditions to distinct actions rather than using the same plan under every scenario.
Decision Framework
A practical uncertainty review can use a two-axis assessment.
First, rate continuity exposure: low, material or existential. Second, rate strategic attractiveness of the affected market or activity: declining, stable or growing.
Then test five questions:
- What assumptions in the current business case have changed materially?
- Which commitments are still reversible?
- What assets or capabilities must be protected even if activity is reduced?
- Where can resources be redeployed without destroying strategic options?
- What evidence would trigger a move from hedge to rebalance, or from rebalance to shift?
The decision should include pre-agreed triggers. For example, a funding-cost threshold, regulatory milestone, supply interruption duration or demand level can activate a different response. This reduces decision latency when conditions deteriorate quickly.
Related article: Risk Is a Distribution, Not a Number
From Strategy to Execution
Immediately, identify the external assumptions shared by multiple projects. If several initiatives depend on the same currency, regulation, supplier market or financing condition, the portfolio may carry more concentrated exposure than individual risk registers reveal.
In the medium term, create scenario-linked actions rather than scenario presentations. Each scenario should specify what would be accelerated, paused, protected, hedged or exited.
For major irreversible investments, build real options where feasible: staged capacity, modular design, alternative suppliers, conditional contracts or decision gates before full commitment. Flexibility can be worth more than small optimisation of the base-case return.
Longer term, connect external scanning to portfolio governance. Market, political, technology and financing signals should have a route into investment decisions. Foresight without reallocation authority is merely observation.
Signals to Monitor
Monitor changes in lender appetite, cost of debt, supplier lead times, regulatory direction, customer behaviour, cross-border friction, currency volatility and competitor investment. More importantly, monitor whether those signals are changing the assumptions on which current capital decisions were approved.
A governance warning sign is when risk teams report a material external change but project forecasts, portfolio priorities and capital allocation remain untouched. That indicates the organisation can sense change but cannot convert sensing into action.
Questions for the Leadership Team
- Which external assumption, if wrong, would invalidate the largest amount of capital currently committed?
- Where are we waiting for certainty even though delay itself is destroying option value?
- Which capabilities must be preserved through a downturn because they will be difficult to rebuild?
- What external shock could affect several portfolio components at the same time?
- Which actions have we pre-agreed for materially different scenarios?
- Where might competitors' paralysis create an opportunity for disciplined acceleration?
Closing Perspective
Uncertainty becomes strategically dangerous when the organisation has only one plan and one set of assumptions.
Resilient leadership does not pretend to know which future will occur. It designs portfolios and decision rights that can respond as evidence changes. The objective is not certainty about the environment. It is clarity about how the organisation will act under different conditions before those conditions remove the choice.
Source Foundations
- Laker, B. & Roulet, T., “How Companies Can Adapt During Times of Political Uncertainty”, Harvard Business Review, 22 February 2019.
- GlobalData, “COVID-19 outbreak leads to uncertainties in renewable project financing space”, 9 June 2020 (historical source).