Assessing Risk: A Strategic Perspective

Board Perspectives: Risk Oversight, Issue 30

Strategic risk analysis helps boards and senior management test whether the assumptions supporting corporate strategy remain valid as markets, technology, competitors and customer preferences change. Because strategic risks involve uncertainty and may carry both upside opportunity and downside exposure, a traditional mindset is not enough. A practical approach begins by defining the most critical strategic assumptions and developing contrarian statements that describe how those assumptions could fail.

Key Takeaways:

• Define the critical assumptions underlying corporate strategy.
• Develop contrarian statements that show how key assumptions could become invalid.
• Evaluate high-impact scenarios by impact, persistence, velocity and response readiness.
• Establish early warning indicators and response plans for emerging strategic risks.