Risk Management FAQ

How is risk linked to strategy?

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Goals are what we want to accomplish. Strategies describe how we are trying to accomplish those goals. Strategies are never perfect. There is always the potential that something (some threat) could go wrong. These threats represent risk.

Threats impact a strategy's uncertainty in two ways.

First, depending on the basic nature of the strategy certain threats may (or may not) apply. For example, if your sales strategy includes moving into new and unfamiliar markets you might experience different threats than if you are trying to simply sell more to your existing market.

But risk is also linked to strategy at another level. The extent to which a strategy considers and eliminates (or mitigates) specific applicable threats makes the strategy less risky. For example, if we decide to move sales into new and unfamiliar markets, the strategy can be enhanced to specifically hire a new sales team that is familiar with this new market. The threats of moving to a new market are still applicable, but the strategy has taken steps to mitigate or eliminate most or all of those threats.