The risk of a winning strategy

12 July 2016

by Miles Everson

How confident are you in your organization’s strategy? Consider this: more than half of senior executives don’t think they have a winning strategy, according to an ongoing global survey conducted by PwC’s Strategy&.

Boards spend an enormous amount of time on strategy for good reason. It’s one of the most important roles of the board as the representative of a corporation’s owners. Although strategy setting is often conducted on a three or five-year timeframe, it’s far from a set-and-forget exercise. It requires constant time and attention. Roughly two-thirds of directors would like their boards to spend more time on strategic planning, according to PwC’s 2015 Annual Corporate Directors Survey.

As a senior executive or board member, if your confidence in the strategy is lacking, then you might consider a different way to look at your strategy: enterprise risk management (ERM). In all likelihood, you already have an ERM program. But a recent update to COSO’s Framework, called Enterprise Risk Management – Aligning Risk with Strategy and Performance, shows how time-tested ERM processes can be used to enhance the strategic planning and execution processes.

 

It begins by viewing risk from the vantage point of strategy. This is important, or else you might get caught up thinking about the ocean of execution risks that you face. From the vantage point of strategy, there are really three views of risk of consider: 1) execution risk that bubbles up to become risk to the strategy; 2) the risk expectations from the strategy, the risk profiles and base assumptions tied to the selected strategy; and 3) the risk of the strategy not aligning with the organization’s mission, vision and values.

You can read more detail about the three views here, but here’s the bottom line: viewing risk from the vantage point of strategy can help you perform due diligence on strategic alternatives during the strategy selection process.

By due diligence, I mean doing more than stress testing the favored strategy. Rather, I mean putting each of the top alternatives through the same rigorous exercise of checking their alignment with the organization’s mission, understanding their risk profiles, and considering how each maps to the organization’s risk appetite, business objectives, resource allocation and capabilities.

In addition, viewing risk from the vantage point of strategy can help you narrow down your execution risk to identify those that could become strategic risk. Those risks to the strategy are worth being monitored periodically by the board.

Let’s face it, getting a handle on risk will, almost by definition, make you more confident. That doesn’t mean avoiding risk; every strategy involves taking risks. But going through the exercise of examining risk from the vantage point of strategy will make you more confident that your strategy is a winner.

 3d50b5eMiles Everson, Global Advisory Leader  
Profile |  Email  |  + 1 (646) 471 8620

 

PwC will not independently validate the feedback received from third-party sources for consideration in the continued development of the Framework.

Comments

Strategic planning is used to set priorities for better performance in an orgnization which should always align with the organization’s mission, vision and values.

strategic plans go hand in hand with organization goals and objectives.

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