Making the right strategic decisions today is essential for ensuring the success of an organization in the future. This is where strategic planning comes into play, as it is necessary for managing risks and preparing for potential issues. Risk management involves recognizing potential issues that could arise and their potential consequences. It can be anything from bad weather to lack of money.
For some organizations, this can be achieved through relatively simple processes, such as adding a page or section to their annual business planning process for the company to analyze the risks involved in executing its business plan and how it will monitor them. These more significant risk exposures have resulted in a focus on “strategic risks” and “strategic risk management”. Cascade automatically calculates and displays a risk score (probability* impact) to assess the seriousness of each risk and guide the decision-making process. The result of the risk analysis helps to determine the risk-adjusted probability of achieving strategic objectives and the key risks that may negatively or positively affect the achievement of these strategic objectives. Management must take the initiative in carrying out the evaluation, but the evaluation process must include input from board members and, once completed, a thorough review and discussion between management and board.
Because strategy is a set of clear decisions, strategic risk reflects the sum of the risks of those decisions. A necessary first step for boards of directors to understand their strategic risks and the way in which management manages and monitors those risks is to carry out a strategic risk assessment. By first identifying strategic risks, organizations can develop an effective strategic risk management plan to help combat the root cause and mitigate these types of risks. For more information on integrating risk management into the strategy execution model and an analysis of risk dashboards, see “Risk Management Systems and Strategy Execution”. Risk management is really everyone's responsibility in an organization, but internal auditing and risk professionals are usually responsible for overseeing and managing it throughout the organization.
By evaluating strategic risks and responding to them in an ever-changing environment, your company can drive innovation, maintain agility, and develop resilience to risks. In fact, if you don't identify your “strategic risks”, they could have greater consequences, since they can come from several categories and include risks that threaten the future of an organization and even its survival. Risk management is defined as the process of identifying, evaluating, and mitigating risks that pose a threat to an organization.