Broadening Perspectives at the Bank of England
In a world that is changing at an increasingly rapid pace, organizations are finding it more difficult to confront the challenges of uncertainty. This is especially true for central banks, such as the Bank of England, which play a crucial role in ensuring a country’s economic stability.
Summary
- Central banks must increasingly anticipate risks and opportunities in a complex world.
- The Bank of England is introducing a formal approach to strategic foresight as part of its decision-making process.
- The use of scenario analysis provides new insights and helps identify systemic risks.
Organizations worldwide are increasingly facing challenges in dealing with the uncertainty of a rapidly changing world. For central banks, which present themselves as bastions of economic stability, it is essential to anticipate future risks and opportunities in order to make informed decisions.
Historically, many central banks emerged in response to severe economic turmoil. The Bank of Amsterdam, established in 1608, was intended to counteract the devaluation of coins. Similarly, the Riksbank in Sweden was founded in 1668 to restore confidence in the financial system. The Bank of England itself, established in 1694, aimed to support the financing of the war against France.
With its responsibilities in monetary policy, ensuring a stable financial system, and facilitating interbank settlements, the Bank of England traditionally operates within structured and quantitative risk management frameworks. These ensure that there are sufficient options for emergencies and that there is a buffer against potential shocks.
However, in the current global environment, characterized by turbulence, uncertainty, novelty, and ambiguity (the TUNA paradigm), traditional risk management frameworks are increasingly being put to the test. Therefore, central banks are seeking additional approaches that can identify both risks and opportunities. This new perspective is essential for an adaptive and forward-looking approach to risk management.
Finding a Common Language
Ensuring financial and monetary stability is a complex endeavor. The Bank of England utilizes extensive databases to identify potential vulnerabilities and to understand how the economy behaves under pressure. Annual stress tests are conducted on major UK banks to measure resilience and prevent financial disruptions.
With the introduction of strategic foresight in 2023, Bank staff have begun focusing on exploring various plausible futures. This initiative was encouraged by Sarah Breeden, who advocated for an approach that goes beyond routine activities. This new methodology enables the bank to address shadows of the future through scenario analysis.
The foundation of strategic foresight lies in creative narratives built from structured stories. This helps the organization embrace uncertainty in a new way. The goal is to clarify blind spots and enhance strategic insights through scenarios that challenge the status quo.
Horizon Scanning in Practice
Strategic foresight is still developing within the Bank of England. Evaluations have shown that there are various approaches and variations in execution. This approach is further strengthened by external engagement and the sharing of insights with other organizations.
By collaborating with external experts and following best practices, the bank has improved its horizon scanning. These efforts have led to a scenario development process that aligns with the bank’s financial stability mission and provides policymakers with a new perspective to evaluate their toolkit.
Insights from Our Journey
For the Bank of England, developing trust in strategic foresight requires a careful and inclusive approach. The emphasis on openness and collaboration has been crucial for embracing this new way of thinking. By working together with various departments and staff, creativity and cooperation have been stimulated, thereby enhancing the bank’s ability to work effectively in times of uncertainty.
Strategic foresight plays a valuable role in the decision-making support process. A shared language and clear direction within the organization are essential for navigating complex conversations in a rapidly changing world. The insights that emerge from this approach are not only relevant for the bank but also of great importance for the recruitment of talent in a continuously evolving labor market.
Source: Jacqueline Koay, John Lewis, Julia Giese, and Melissa Davey. 09 Dec 2025, https://sloanreview.mit.edu/article/scenario-planning-example-bank-of-england/
