Assessing Risk: A Strategic Perspective

Strategic risks are risks that the business model is not effectively aligned with the strategy, or risks where one or more strategic assumptions lag behind industry realities and the strategy does not reflect the new conditions. Arising from internal process issues and disruptive change in the external business environment, these risks can be lethal because they may not be known to management and the board of directors.

Because these risks are not susceptible to precise measurement as operational risks are, the analytical framework applied to them must be more qualitative in nature. This issue of Board Perspectives: Risk Oversight describes how strategic risk analysis can assist senior management with understanding the critical assumptions underlying the strategy and using contrarian analysis to challenge those assumptions.