Strategic Risk Management in Business & Organization Perspective

Strategic risk is involved altogether aspects of business activities and often summarizes the things that are harder to manage. It also manages things which don’t fall into other categories of risks identified. Generally, strategic risk relates to the impacts of things such:

• Poor marketing strategy
• Poor product launchings.
• Changes in consumer behavior
• Policies and regulatory changes
• Bad acquisitions scheme

The majority of strategic risk is therefore ensure that value for shareowners of a company continues to grow instead of on stagnate or collapse. Strategic risk management can also be assured as risk management on behalf of shareholders in a corporation and, therefore, the responsibility of the board. According to Mercer Management Consultancy, strategically risk is interested in one big question: Does the activity of the company can deliver and maintain a sustained, above-average growth in shareholder value? Given that the environment in which there’s rarely a stable, strategic risk is important for both established and new businesses. As we have seen during the height of the dotcom boom and bust, many start-up didn’t allow their strategic positioning tolerably to ensure long-term, much less short-run, survival.

Investors reacted to both strategic risks quickly and decisively, especially since the fall of Enron, where the worst excesses of corporate greed came to hand. Between May 1998 and May 2003, 10% of Fortune 1000 companies lost a quarter of their value for shareholders in one month after announcing quarterly results reduced and reduced future revenues. The majority of them were caused by the following strategic risk factors:

• Misalignment between go-to-market channels and priorities and
• Decreased customer demand;
• Increased competitive pressure.

Interestingly, others were the result of operational risks and financial risks, which illustrates fairly well the systemic risk in all modern societies.

Strategic risk also includes the more commercialized risks associated with suppliers failures, the loss of key customers, and direction inability to lead the company. The nature of strategic risks faced by any organization varies dependant on the types of markets in which it operates. For instance, when markets are highly regulated, strategic risks come from government intervention. This includes the financial sector and biotechnology and pharmaceutical industries, and sectors that have traditionally been nationalized, such telecommunications and energy. Where companies operate in competitive markets, the risks are likely to come from new entrants and innovations from the players. Strategic Risk Management requires that those responsible for the management of the company have a good understanding of the competitive landscape and hence they ensure that its organizational design is appropriate and aligned to meet the needs of its markets and clients. One way agencies address this is through strategic planning.

Almost business leaders recognize the value of the policy setting. Not only does it enable them to establish clearly the future for everyone in their organization can listen, but it also ensures that investments that will change the body are consistent with the future described in their strategy. Put differently, an effective business strategy can help mitigate some of the risks they might face. To be effective, an organization of the strategy must take into account a wide range of factors including:

• Existing operational performance;
• The nature of the overall business environment, including the national and global economy; competitors, which perhaps local, national or global;
• The market factors that affect the viability of companies and how these are changing;
• Technologies needed to run both an efficient and to develop and support new products and services;
• People needed to maintain or increase market share.

Despite the benefits of creation and delivery against a strategic plan, companies are still exposed to key strategic risks. A strategy can’t guarantee the protection and, as a matter of fact, following a strategy can lead to problems. This is particularly the case in mergers and acquisitions, which so often fail. Too often, traffic sounds fantastic and a great way to build market share, or expand the range and scope of the company. Unfortunately, the majority of mergers and acquisitions fail because the integration of poor and selfish battles in the meeting room that future CEOs.

As a matter of fact, mergers and acquisitions are two of the best ways to destroy the value of talent and waste. And then of course there is the long tail of integration that the cultural gaps between the two organizations take time to dissipate. Sometimes it never happens. Meanwhile, petty rivalries distract attention from the organization to realize the benefits that everyone (well, on board at least) was hoping to achieve.