Strategy is fun, but Risk Management is Essential to Strategy Management

The mismanagement of strategic risk is the number one cause of shareholder value destruction, according to a 2012 study by Booz & Co (interestingly they performed a similar study in 2004 which reached a similar conclusion. What money would you put on a similar survey in 2020 reaching the same conclusion again?).

In reality, risks and opportunities are often two sides of the same coin.

But if you have not identified it – you can’t manage it – or manage for it.

To quote Colin Powell (former American National Security Advisor, Commander of the U.S. Army Forces Command and Chairman of the Joint Chiefs of Staff):

“Never neglect details. When everyone's mind is dulled or distracted, the leader must be doubly vigilant. Good leaders delegate and empower others liberally, but they pay attention to details, every day”

But to do that – good leaders must know what the right details are to pay attention to – and they must know how to do so!

And underpinning it all is still Culture:

“Culture eats strategy for breakfast”

is a famous quote from legendary management consultant and writer Peter Drucker.

And culture does the same to risk as it does to strategy.

I know of one large organisation in which the impacts of Corporate decisions about structure and ERP implementation appeared on the Risk Register of every business unit – and in each business unit the risks which were identified, reported and discussed each month eventuated anyway.

Why?

Because the organisation culture would not allow for Corporate decisions to be challenged (especially when they were a core part of the ‘pitch’ to the analyst community).

The price? Millions of dollars off the bottom line.

So yes, culture is the ultimate tool in managing strategy and risk.

In short:

you cannot afford to have missing pieces in the organic whole which is your business!