Integrating risk into the strategy-setting process is important. If ignored, risk becomes an afterthought to strategy and an appendage to performance management. While risk is oftentimes viewed as something to avoid, the strategy-setting process is a good time to discuss risk appetite and how it might be exploited to create a competitive advantage.

Following are five lessons for executives and directors to keep in mind when integrating risk with strategy.

What we don’t know may be more important than what we do know

Are management and the board unknowingly flying blind? Adapting to innovative technologies, dramatic market shifts and other disruptive changes is a game every successful organisation must play well. Companies must quickly recognise a unique opportunity or emerging risk and act on that knowledge to evaluate their options to seize the initiative before competitors do.

Past generations of managers exercised more direct control over the factors most influencing the realisation of the strategy. However, for managers today, time to sense, analyse and react has become a precious commodity as the strategic horizon continues to shorten with accelerated change. Only the timeliness of recognition and reaction to key factors affecting the strategy are within the control of today’s managers. Organisations that choose to embrace the status quo or even follow the herd may not recognise changing paradigms and the need to innovate and adjust until it is too late.

Oct-Dec 2014 Issue