Risk Assessments Strategy and Strategic planning
Jun 26th, 2019
Risk Assessments Strategy and Strategic planning is inspired by a book entitled Strategy for Executives. In that book strategy is defined as “a compendium of deliberate choices that an organization makes to maximize its value over a given period of time”.
Defining Strategy and meaning of risks
We like the book’s dynamic definition of strategy.
Moreover, it fits very well with our definition of strategic risks which derives from the use of explicit risk tolerance thresholds in the ORE methodology.
At Riskope we believe strategy is indeed about choices. Misevaluated risks constitute an obstacle against making sustainable and defensible choices. Indeed, deliberate choices made without understanding the risk landscape often end-up in pathetic blunders.
If the risk landscape of a company, an endeavor, a project is understood, then managers can focus toward maximizing value of the company. That means that knowing what can detract value is extremely important and should never be neglected because of promises or extreme gains.
Rational and comprehensive, holistic risk assessments can help maximize value. Comprehensive and holistic risk assessments can be “light”, easy to implement”, avoiding “paralysis by analysis” and to the point. The idea that comprehensive and holistic means unsustainable, extremely costly, cumbersome is wrong and we have proven this over and over again.
Time frame is also important. Risk assessment have to be swift yet “precise enough in relative terms”. Because Management needs answers now, not years later.
That is even more important nowadays as business environment and conditions are changing very rapidly. As a result projects, endeavors, businesses need to adapt very quickly or face dire consequences.
Common practice risk assessments use probability impact graphs, FMEA. They lack of resolution, due to various inherent issues we have already discussed many times. Thus, they are not “precise enough” for modern decision making. Precise in this discussion does not mean we believe in exact numbers, but instead we care about depicting the risk landscape with enough nuances and approximate numbers, to allow risk informed decision making.
Value chain and risks, Risk Assessments Strategy and Strategic planning
Value chain represents the activities involved in creating the Value Proposition of a company, a project, an endeavor. It describes the activities, resources and business functions. These generally boil down to people, assets, processes.
In many value chains analyses we have seen, Risks do not appear, at least not explicitly!
We believe that many projects, startups and even corporations end-up failing because their value proposition falters due to poorly understood risk exposures.
Furthermore, it is paramount for any player to be able to understand which risks are:
- tolerable, (Green)
- intolerable but manageable, (Yellow)
- intolerable and unmanageable, thus strategic (Red)
in order to allow successful strategic and tactical planning of their development.
Tagged with: comprehensive risk assessments, operational and strategic information, operational hazards
Category: Hazard, Optimum Risk Estimates, Risk analysis, Uncategorized