Business Plan Risk

Business Plan Risk-67
Strategic risk management is the process of identifying, quantifying, and mitigating any risk that affects or is inherent in a company’s business strategy, strategic objectives, and strategy execution.

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A key tenet of ERM is measuring risk with the same yardsticks used to measure results.

In this way, companies can calculate how much inherent risk their initiatives contain.

One falls along a narrow, steep curve, indicating a low risk of failure and little upside opportunity.

The other is represented by a wider bell, with greater chances of both under- and over-performance. The answer depends on an individual company’s appetite for risk.

Studies of the largest public companies indicate that strategic risks account for approximately 60 percent of major declines in market capitalization.

Operational risks have just half that impact (about 30 percent), and financial risks generate about 10 percent.

Strategic risk management: shifting the curve Now imagine a third curve with that same expected result.

This one rises steeply from the left but slopes more gently downward on the right.

The example above maps out the steps that every risk management plan should include.

Before you create a risk management plan, think about which areas of your business it will refer to.


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