on strategic risk management

by Michael Werneburg
on 2015.02.02

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It's a common bit of wisdom in the risk management business that "strategic risks" account for 70% of business failures. I don't know if it's been conclusively proven, but it makes sense that fundamental problems of strategy would be a great source of problems for a business. In fact, I've seen several businesses – and new ventures founded by already-successful companies – founder over fundamental errors in strategy.

But strategic risk is a hard subject to grasp. These matters are so big it's a problem even understanding where to start. From time to time you see a Risk Manager post a question to a forum (such as a LinkedIn "group") asking exactly that – where to start evaluating "strategic risks".

Secondly, it can be problematic to approach the C-suite of a business and start demanding details on strategy. A common criticisms of internal auditors is the perception that the auditors tend to wade into a situation asking questions where they just don't know enough about what they're asking. The "How did you come to that decision?" and "Can you show me if you're on track?" questions. These tend to aggravate senior management.

I think both problems stem from the same root cause – the difficulty in mapping the theoretical concepts of strategy to a the specific circumstances of a given business. Happily, there are some stellar sources available to anyone studying strategic risk.

One superb source is the body of work by the late Peter Drucker. I've devoted a separate page to my interpretation of Drucker's writing from a risk view.

>> Peter Drucker on risk

2015.02.04

Peter Drucker was a prolific and talented business writer who has much to teach us about strategic risk.