Strategic risk management can generate value by identifying opportunities to capitalize on uncertainty to maximize gains and improve competitive positioning of the business.
The business ecosystem environment is full of uncertainty, ambiguity. In fact, companies that are still stuck with their old ways run the risk of being rapidly disrupted. Forward-looking organizations are on the journey to increase organizational agility, innovation, and people-centricity.
Business initiatives require the highest risk-taking at a strategic value chain; including investments and manageability: Business investment is crucial for the long term organizational growth; it’s also risky if not being managed effectively. Great investment managers ask insightful questions about the impact of ideas, the practicality and scalability of business models. They need to evaluate the impacts of investment decisions by doing comprehensive cost/risk analysis, return on investment, etc, and make an objective assessment of their investment portfolio effectiveness. It’s important to embed risk management mechanism into key business processes, ensuring visibility into each investment is established to provide ongoing investment health information and improve its success rate.
Interdictive analysis is an effective tool to identify and prevent risks: Assuming the risk is highly likely to occur, corporate management needs to imagine with many experiences involved in current or in the past. Preventing is more effective than fixing the issues. Statistically, the top-performing companies implemented on average twice as many of the key risk management capabilities as those in the lowest-performing group. Interdictive analysis is an effective tool to identify risks, estimate the impact of upcoming events that may happen in strategy/operation plans, and the consequences, as well as how to avoid dysfunctional patterns in the organization. Assuming the risk is highly likely to occur, corporate management can apply interdictive analysis to identify reputational risk, competitor reaction, financial markets perception etc, all have a risk factor which needs to be recognized, estimate the impact of upcoming events that may happen in strategy/operation plans, and the consequences, estimate the threshold of loss potential, to improve risk intelligence of the company.
There are upward risks and downward risks. Only the highly mature companies can take advantage of risk as a catalyst to business growth. Those that take a very objective and pragmatic view of risk are more often than not, the ones who come up with imaginative and innovative ways to turn risk to their advantage. Strategic risk management can generate value by identifying opportunities to capitalize on uncertainty to maximize gains and improve competitive positioning of the business.