Background and Necessity: Informal settlements, as one of the most complex urban governance challenges in developing countries, have consistently been the focus of urban planning policymakers and researchers. However, most existing interventions suffer from instability and limited effectiveness due to a lack of a systematic understanding of the causal structure of the influencing factors.

Objective: The present study aims to identify strategic factors and design an analytical framework for scenario-building regarding the future of the formalization process.

Methodology: This research was conducted using a mixed-methods approach. through a systematic literature review, 14key variables affecting formalization were identified, and the conceptual framework of the research was developed. In the second phase, the relationships among these variables were evaluated by completing a cross-impact matrix by an expert panel consisting of 15specialists in the fields of urban planning, urban law, and urban sociology. The resulting data were analyzed using MICMAC software, and the spatial position of each variable was examined on the scatter plot (horizontal axis: dependence, vertical axis: influence).

Key Findings: The findings revealed that executive and managerial inefficiencies, institutional and legal-political challenges, and economic empowerment and mobility—as the three driving and strategic variables of the system with high influence and low dependence—are the most important leverage points for policy intervention. Conversely, potential negative risks, despite having the highest absolute influence, possess a crisis-generating nature and remain beyond direct control due to their severe dependence on other variables. Furthermore, tenure security, acting as a central regulatory variable, plays a connecting role between upstream structures and the tangible impacts on the residents’ lives.

Conclusion: The research findings emphasize the necessity of prioritizing institutional and managerial reforms as a fundamental prerequisite for any effective intervention in the formalization process. It also provides an analytical framework for designing future scenarios and evidence-based policymaking