How to Manage Strategic Risk

Managing strategic risk is important, but many companies aren’t sure where to start. There are some general ways to begin managing strategic risk to consider as the foundation for a strategic risk management plan. These are the basic steps in the risk management process.

Define the Business Strategy

When a business defines its strategies, it might come through a SWOT analysis or other scorecard. But often, defining business strategies comes without accounting for risk. At the planning stage for strategies and objectives, it’s important to begin with an idea of what the strategic risk might look like and where it will become increasingly important to work with risk. Identifying risks should start in this planning stage.

Establish KPIs

Key performance indicators (KPIs) are a regular part of any business plan, and they should be a part of strategic risk management as well. As a business defines its KPIs, risk should be taken into account. In addition, companies should create KPIs to determine the results of their risk management plans. How will the company be able to determine if a SRM plan is working? How will risk affect other business KPIs? Businesses should consider these as they work with KPIs.

Establish KRIs

KPIs are crucial, but they are typically more oriented toward the past. Key risk indicators (KRIs) are all about looking forward and anticipating future risks and roadblocks the organization could face with strategic risk. A strong SRM plan will include KRIs that help plan for risk, identify tolerance levels, and indicate when action should be taken for particular risks.

Include External Perspectives

Sometimes companies on their own don’t have the resources or experience to properly work with strategic risk and create a strong management plan. That’s why many organizations benefit from working with external perspectives. External perspectives are also valuable when the current team is too close or too involved with the company to accurately assess and mitigate risks. A risk strategies company or risk professionals could be valuable to help provide that outside perspective.