April 13, 2020
June 25, 2020
You may have heard of names like Kodak, Blockbuster or MySpace. These three companies were the pioneers of their respective fields but they since disappeared. Why? Because these companies were slow or short-sighted to see the strategic risk iceberg that destroyed their business.
Every company in the organizational paradigm takes risks. They have to do it otherwise they would never realize the direction that the market is taking and how they need to improvise to keep their ship floating in this vast ever-changing ocean.
All of the brands and different electronic devices that you see in your hands daily nowadays were strategic risks at one time and now we don’t even consider them a wonder anymore because they are so mainstream.
This innovation and changing the world by a simple device like the iPhone that changed the whole world when it came out, is the reason why organizations need to take strategic risks and change the game as long as they can so that the world becomes a more interesting place.
Taking risks is tough, but how can you make sure that the risk that you are taking doesn’t damage the company or its reputation in any way? Well, you do that by managing these strategic risks that you are about to take.
In this article, we will let you know all about strategic risks, how they are comparable to other types of risks and how you can successfully manage these types of risks to bring value and success to the company.
Source: LaConte Consulting
In business, there are a lot of risks that the company has to take and endure if the risk doesn’t pan out. But there are risks that if you don’t take like certain decisions to change the business direction or something of that sort, can eviscerate the business. These are strategic risks.
At its core, strategic risks are the ones that affect the company’s whole strategy to function and conduct its business. They are very difficult to spot and manage like the other risks that threaten the organizations nowadays. Why? Because this risk is not always “negative”.
What do we mean by that? Well, all the other types of risks pose an imminent threat that needs to be resolved for the business to prosper but not strategic risks. Don’t get it wrong because strategic risks also pose a threat but they can also be a blessing in disguise.
This means that managers and the other high-level stakeholders need to look for these strategic risks by labeling them as things to be mitigated or hedged.
Another thing to remember is that all of the other types of risks arse from factors outside the domain of the company, but strategic risks are the ones that can be applied to the current products produced by the company and how these products are going to be released in the market.
When you are ready to identify and manage strategic risks, two essential tools should always be in your toolkit. They are:
Gathering information on both of these can be very challenging from a time and investment perspective but you must gain as much data as much you can relating to strategic risks. Why? Because the more data you have the more you can safeguard your company’s success.
It’s a good practice to keep a long list of these risks at hand. That will enable you to eliminate the ones that are not that impactful, and also, this list will help you have a look at all of the risks and not underestimate any of them.
Looking for top risk management software? This one is for you:
So, now you know what strategic risks are and how they are related to your organization, but what is the severity of the impact that they will have on your company and is it worth your time to even manage the risk?
The following are some of the metrics that can help you measure and manage strategic risks. They are:
Companies all over the world can use these two metrics, but the results and the stakes dependant on them would be quite different for big and small businesses.
Now that you have all the information regarding Strategic risks, you need to compile it in one location and that location is known as a Strategic Risk Management Framework.
This is where you gather all of the resources that are required to reduce the losses that are caused by external or internal damages.
Let’s take a look at how this framework is made.
All in all, strategic risk management requires perseverance and leadership skills. However, it only works if you have the capacity to improvise as per the project’s ever-changing curve in real life situations. We would like to hear your thoughts from the perspective of a professional project manager. Feel free to enlighten your fellow readers at nTask Manager Blog by using the comments section below.
Manage your team, tasks, projects and more on a single platform. Sign up today, it's free.