Strategic Risks: The New Frontier of Risk Management, from The Wall Street Journal.
Risk management has undergone a refocusing in recent years, in an attempt to make its techniques and processes more adaptable to shifts in business and the economy, and more responsive to the demands of C-suite executives. Andrew Blau, managing director of Deloitte & Touche LLP’s Strategic Risk Solutions practice, discusses the benefits of focusing on strategic risks to help organizations identify what could undermine their future business, adapt to new challenges and take advantage of emerging opportunities.
Q: How do you define strategic risk?
Andrew Blau: Strategic risks are those that threaten to disrupt the assumptions at the core of an organization’s strategy. They’re often hard to spot and hard to manage. What makes them especially difficult for executive teams is that traditional approaches view risk as mainly negative—things to hedge or mitigate. Strategic risks are different, since they can also point to an organization’s next opportunity. With strategic risks, executives are forced to make a choice: “Are we going to try to resist this, avoid it and push it off if possible? Or are we going to embrace it as an indicator of where the market is going and where our next big opportunity may be?”
Strategic risks can appear as sources of likely disruption to a whole industry, and that makes them very powerful. Organizations that can accelerate the discovery of these risks will likely have an advantage. The faster they can find the weak signals of potentially disruptive change, the more time they have to plan and to act.