Strategic Risk Management, The Next Level Enterprise Risk Management

 

Enterprise risk management (ERM) , is an all encompassing process of dealing with operational risk in a business. It came to prominence after the world wide financial crisis in 2008. It has grown in practice with business owners seeing the benefits of dealing with risk holistically across the whole organization. 

Now on the heels of ERM, comes Strategic Risk Management. Strategic risks are the risks that impair an organization from meeting their strategic objectives. They impact shareholder value and organizational survival. In other words strategic risk are the risks that executive management and boards of directors stay up at night thinking about. 

Risk managers are now faced with helping businesses understand and control these risks. The approach is to focus on improving what is known as the high failure rate of strategic initiatives, which is estimated at 70%. In other words most businesses fail at their proposed strategy not because of a lack of trying but because of unmanaged risk. Some examples of strategic risks are , changing consumer demand, competitive pressure, senior management turnover, stakeholder pressures, and technology change.**

As business owners learn more about strategic risk, they will demand more attention from their risk professionals. No level of ERM success, which is focused on operational and safety, can prevent failures of business strategy which can be devastating to an organization.  Until next time be careful out there and know your risk.

Posted by: G. Kevin Nemith, President/Agency leader , CNC Insurance & Pfister Insurance. 

Member of the Hilb  Mid-Atlantic Group

knemith@hilbgroup.com

**Reference IMA, March 2016