How can risk managers add more value to their organisations?
Ask most risk managers what types of risk exist at a company and they are likely to distinguish two groups. One is Operational Risk, while the other is Financial Risk. Yet there is a third type of risk that is frequently overlooked, mainly because until recently it was hard to track at all.
Believe it or not, but the biggest impact on a business’ market capitalisation is often Strategic Risk. Unlike operational risk, which is about doing things right, strategic risk can be referred to as doing the right things. Operations keep the train on the tracks and finances add fuel to the engines. But strategy decides where your company is headed, why, and what it can gain from the journey.
Traditionally strategic risk has been ignored because as mentioned earlier it’s hard to track. Since most regular risk practices are around governance and compliance measures, strategy also often doesn’t enter the conversation. As a result, risk managers are often only seen as naysayers and forecasters of doom. They are rarely considered valuable allies to strategic conversations.
Strategic risk is the discipline of identifying risks to a corporate strategy, objectives and execution. It can include factors such as staff changes, competitive pressure, impact on brand and much more. It stands to reason that if strategic risk is managed and minimised, strategic opportunities grow in response. As the maxim goes: you don’t know what you don’t know. Well, strategic risk is all about knowing.
Modern risk integration platforms such as Riskonnect provide ample tools, channels and opportunities to collate and understand strategic factors. From the nitty gritty of company data to harvesting reports on external events, using these new technologies a risk manager is able to provide a coherent and up-to-date single version of the truth that strategist can rely on. They also accelerate reporting, often to an ad-hoc level that meets the nuanced requirements of the requesting audience.
It stands to reason that by lifting strategic risk into the view of the company, risk managers can elevate from being perceived as naysayers to highly valued parts of the strategic process. Best of all, it can start small, operate on OPEX budget, not alienate any part of the company, and even leverage current legacy business systems.
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