All inquiries carry with them some element of risk. There is no guarantee that the universe will conform to our predispositions.

Carl Sagan

Strategic risk management

Businesses that have considered their strategic options carefully, and the risks to achieving them, will outperform their competitors. Public sector organisations face different challenges, trying to balance competing policy priorities while avoiding the risks of over-regulation.

Strategic risk management (sometimes referred to as enterprise risk management) is used to identify a comprehensive set of internal and external factors that could compromise an organisation’s ability to achieve its overall objectives. For the private sector this translates to anything that could threaten commercial interests and for the public sector it translates to anything that can threaten effective policy-making and implementation.

It is the scope of the potential threats that differentiate ‘strategic risk management’ from plain vanilla ‘risk management’ as in other respects, the activities are the same. The latter involves a greater focus on specific activities, assets or groups of people, and organisations often apply a ‘bottom up’ approach, employing risk registers and sophisticated software packages to describe its risk profile. While these methods have their place, for strategic risk management it is often more appropriate to adopt a ‘top down’ approach which can get to the heart of the issues much more effectively and avoids getting embroiled in unnecessary detail.

Our approach involves the construction of a simple representation of your organisation’s objectives and how it is structured to deliver this. From this simple model a strategic risk management framework can be developed for your whole organisation. This encourages creative thinking, is ideally suited to horizon scanning, and provides a structured way of identifying your organisation’s strategic risks. Furthermore, it clarifies how parts of the organisation and other stakeholders can influence the risks; a vital step to managing them more effectively.

While our approach is straightforward, many of the issues involved are not. For example:

  • How to assess the likelihood and severity of rare events, and the effect of different risk control strategies
  • How to value and trade off different risks – this requires clarity about the organisation’s objectives and priorities
  • What level of risk the organisation is willing to tolerate in different areas – this is often referred to as its ‘risk appetite’

We have applied our approach to strategic risk management to a number of public and private sector clients who have found that it has helped integrate risk management into their strategic planning activities and brought greater clarity to the risks the organisation needs to manage in order to succeed.


EXAMPLE CASE STUDIES:

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