Strategic Risks are risks that affect or are created by an organization’s business strategy and strategic objectives. For companies that are committed to thoughtfully managing risk, strategic risk is not a new concept. However, with social media and the speed in which everything happens these days, strategic risks are becoming a high priority for senior leaders. In a recent study released by Deloitte, 81% of companies surveyed now explicitly manage strategic risks, rather than simply focusing on more traditional risk areas, such as operational, compliance and financial risks.
When managing strategic risks it is important not to lose sight of the potential financial benefits gained from assuming certain risks that align with the business strategy. Companies that are shifting their focus to include strategic risks should continue integrate these discussions into their overall Enterprise Risk Management (ERM) process. This will allow organization’s senior leaders to view these emerging risks on a macro level which is vital to the success of an ERM program. Doing this will enable senior leaders to view risk not just as a loss that they could be exposed to, but to also understand how their organization can use risk to increase its profits.
One of the first and, probably most important, steps for any organization’s ERM process is to form an Executive Level Risk Committee whose responsibility will be to ensure the firm’s risks are aligned with the overall business strategy.
The ALS Group endorses this philosophy and was instrumental in creating such committees for several of our clients.
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