Strategic Risk: Are You Cool or Uncool?

My view of how managing strategic risk and the related dimensions is one key to long-term success.

As COSO and ISO continue to suggest or imply that strategic risk has multiple dimensions, it is worth considering how these dimensions can result in alternative scenarios. A review of the strategy and disruption reading list on the prior blog (or taking my strategic risk analysis class) would suggest that the relationship between performance over time depends upon managing the strategic risks. Managing or not managing these strategic risk dimensions can lead to two alternatives: cool or uncool.

Strategic Alignment

Cool: The organization understands the current market, regularly challenges their view, and identifies (and measures success on) future dimensions.

Not Cool: Management has not given much thought (nor analyzed) as to how their business aligns to the market, environment, and its direction.

Strategic Capability

Cool: The organization builds capabilities and market advantages based on a reasonable analysis of the market and expectations of future gains and cash flows.

Not Cool: The organization spends its money primarily based on last year's budget or has no idea how the budget aligns to building strategic advantages.

Business Model

Cool: The business model is clearly understood, frequently tested, and customers relationships are powerful, sticky, and linked to value. New business models, innovations, or service opportunities are regularly sought after.

Not Cool: Just go sell something. 

Surprises etc.

Cool: The organization recognizes it is an uncertain, disruptive, and changing world and aggressively seeks to gain more knowledge, minimize surprises, be robust when surprises occur (knowing they can occur), and be agile in quickly responding to changes.

Not Cool: The organization regularly gets surprised and has trouble recovering or adapting from certain events, regularly disappointing stakeholders.