STRATEGIC RISK || TRAINER ANIL MAURYA

Objective 

  • To learn how to manage strategic risk 

Key Learnings

1. What is Strategic Risk? 

Risks associated with business strategies and plans are called strategic risks. Strategic risk arises due to the failure or the absence of strategies to run any business. 

For example, in absence of any strategy to launch new products in the market may trigger "an innovation risk," which is a type of strategy risk. 

Strategic risk can also be defined from the perspective of liability risk. If you do not properly assess any liability and there is no liability coverage provision in your company, then this becomes a liability risk. 

For example, a company wants to work on a new project to expand its business. In this case, a project risk arises in case of:

  • Project planning failure
  • Improper planning
  • Strategy failure
  • Not getting a new project 
  • Missed deadline

Project risk is also a type of strategy risk. 

All the aspects of business in which strategy or decision making is involved, are a type of strategic risk. 

2. Strategic Risk Vs. Operational Risk

  • Strategic risk arises due to internal and external factors (macro and micro environment of a company) while the operational risk is caused due to internal factors of a company (micro environment). 
  • Strategic risk is related to failure or absence of business strategy and decisions while operational risk arises when a company is not able to properly execute its decisions. 
  • Strategic risk is a matter of concern for business owners, board of directors, and CEOs of a company while the operational risk is important for employees and the workforce. 

3. Aspects to Identify Strategy Risk 

Following are the aspects to identify strategy risk in a company:

i. Complete Business-Related Knowledge

The company should have complete knowledge about its business including its:

  • Mission
  • Vision
  • Short-term and long-term goals

ii. Target Audience 

A company should be aware of target customers of its products and services. Without knowing its customers, a company cannot achieve its goals. 

iii. Competitors 

Before entering a market, a company must know its competitors. 

iv. Market-related Knowledge 

A company must have complete knowledge of:

  • Doing business with vendors
  • Getting enlisted as a vendor
  • Getting government contracts or tenders
  • Operating business in the current environment 

v. Execution of Strategies 

  • It is important to execute the abovementioned strategies.
  • Without entering into the execution stage, your business cannot kick off. 

4. How to Manage Strategic Risk?

To deal with strategic risks, a company has to manage strategic risk. Following are the five steps to manage strategic risks:

i. Define Business Strategies and Objectives 

A company has to identify: 

  • Its mission and vision
  • Its growth in five years
  • Its purpose
  • The uniqueness of its products and services

ii. Establish Key Performance Indicators (KPIs) to Measure Results 

  • A company has to identify and establish its KPIs to know whether it is moving forward toward its vision. 
  • Establishing KPIs is very important for a company.
  • The company should also do a SWOT Analysis to know its "Strength, Weakness, Opportunity, and Threat (SWOT)."
  • SWOT Analysis helps a company to change its strategy as per changing environment.

iii. Identify Risks that Can Drive Variability in Performance

  • A company needs to identify risks that are creating hindrance in achieving its desired results. 
  • For example, many companies shifted their offices from China to other countries to deal with the anti-China movement during the 2020 COVID-19 crisis. 

iv. Establish Key Risk Indicators (KRIs) and Tolerance Level for Critical Risk 

  • KRIs and tolerance level for critical risks are the forward-looking indicators which anticipate and identify potential roadblocks. 
  • These indicators provide triggers, warning signals, and danger signs for intolerable risks. 
  • The company should establish these indicators to tackle strategic risks.

v. Do Integrated Reporting and Monitoring

  • A company should have a control mechanism and monitor things regularly.
  • A company should also be prepared to mitigate any future risk.
  • A company should grasp opportunities as they come. 

Key Outcomes of the Video 

  • Know your target audience and competitors before entering the market
  • Define business strategies and objectives
  • Establish KPIs and KRIs to deal with strategic risks
  • Do integrated reporting and monitoring to mitigate any future risks

#traineranilmaurya, #campuspreneur, #salestrainer, #businesscoach, #today, #riskmanagement 

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