Overlooking the link between strategy and risk management can distort either the strategy setting process or the assumptions your risk management model is based on. Some suggestions about how to avoid such a risk.
We just do not have enough fingers to plug all the holes in the hull once the boat is sinking; the key is putting risk management on the forefront of your strategy.
The integration of an operation-based Enterprise Risk Management framework and a Strategic Performance Management dashboard is the answer!
Thanks to such integration more and more value is added to your risk management undertakings. They indeed will not merely consist of a sequence of contingency-based interventions as results of occasional crisis or requirements and demands coming from any external organisations, but a long-term and sustainable strategy in which each project is a step towards the continuous improvement of the company’s standing.
And then you would consider that the very problem while evaluating a risk management initiative is: What will its impact be in financial terms? Or even “If I start, what return can I expect in terms of marketing? And of revenue increase?”
A Strategic Performance Management (SPM) approach aims at monitoring corporate strategy objectives through measuring the most relevant Key Risk Indicators (KRI’s).
The benefit of a SPM Model is great as it measures the global outcomes of the corporate strategy through individually measuring the relevant risk factors. This way it allows managers to measure and even predict the result of their risk mitigation commitment.
Measuring the impact of risks over the overall company’s strategy can be crucial in successfully pursuing the strategy. It means that any company should measure the impact that risks may have over financial and operating objectives, costs, marketing and even company’s reputation, as stated in your strategic business plan.
And it may happen that you will find out how and why risks are not just something that should be evaluated as they impact the strategy, but, even more importantly, they have to be evaluated also as they do come from the strategy itself.
When risks seem to become overwhelming, when your efforts to tackle them seem to be useless, when even the opinions on how to deal with them are controversial, the best choice is probably to explore the potential risks you are experiencing to figure out whether or not it’s a good idea not to proceed with just mitigating them, but to review your strategy based upon the risks you are dealing with.