The document argues that traditional methods of risk management do not help with strategy, where things are more uncertain and more complicated. It has developed a systematic approach to deal with strategic risks, which include loss of reputation, fraud, staffing, customer dissatisfaction, over-complexity and financial mismanagement.
“Strategic risk consists of the most important risks that an organisation faces, i.e. the possible future scenarios that would make a material difference (for better or worse) to its ability to achieve its main objectives or even to survive. These risks differ in magnitude from project risks or operational risks, which are generally more limited in their impacts,” it says.
The document argues that mnagement of strategic risk includes having a system to manage foreseeable risks, dealing with unknown risks, seeking robust responses, avoiding self-inflicted wounds, studying embedded processes and using some tools.
It offers four. Horizon scanning identifies potentially important issues. Concept mapping establishes links between objectives and risks, issues and activities in a kind of diagram so that the overall picture can be seen. In pattern recognition, someone identifies significant trends that could lead to a predicted result. Risk grouping gathers risks into broad categories for analysis and reporting.
The Euro 50 report is available with CD ROMfrom Thomas Telford.