When strategic plan becomes a risk

Robert Mandeya

It is that time of the year again when most organisations are busy preparing their strategic planning retreats to chart the way forward and pick the “right” direction come 2020. It is in these annual strategic plans that businesses chart the actions they intended to take to increase revenue and profit.

Along with determining the strategies for the upcoming year, you must map out the specific steps required for the implementation of each strategy, who within your staff is responsible for accomplishing each step and when the steps must be completed. Fair and good, however, most of these plans fall short on how to manage risk every step of the way. This has been the reason for most of the failure in strategic plan execution.

Understanding risk

Put simply, risk is defined by those elements which promote failure instead of success in one’s endeavours. Given that strategic planning is designed to guide an organisation to success in today’s dynamic marketplace, identifying risks must become part of that planning and be carried out through plan execution.

Changes in the competitive landscape are occurring faster than ever. A wide variety of influences, including the impact of technology, shifts in competition from unusual sources, and rapidly shifting governmental or regulatory environment can be disruptive, even to the most effective organisation.

When these changes are added to traditional risks such as resource utilisation, workforce expansion, and operational effectiveness, it is clear that risk management must be part of initial planning, as well as ongoing execution of any suitable strategy.

Risk in the strategic plan

Understanding the elements of risk in the strategic plan is essential to the identification, management, and mitigation of potential failure. Using risk management to assess the quality of a given plan, understand the plans sensitivities to risk, and the ability to mitigate the impact of risk on the strategic plan, can differentiate between success and failure.

By understanding the potential impact of risk to the plan, its strategies, goals, and objectives, it is easier to develop and execute mitigation approaches that minimise the overall negative impact to the plan. This helps improve decision making during risk escalation, and ensures the best outcomes possible. There are multiple types of risks inherent in strategic planning that can cause a high rate of failure.

Identifying risk

Being able to identify and evaluate overall risk within the strategic plan allows the organisation to develop more effective strategy management plans that concurrently managing the impact of risk on strategic outcomes. Management plans must consider the ongoing organisational risk and the impact those risks might have on the organisations ability to achieve its strategic objectives. Risk analysis and management processes must be in place as the organisation develops its strategic plan, initially to determine the quality of a given plan and its probability of success. The analysis should provide sensitivity to the impact of risk on the plan.

Plan must support objective

The quality of a given plan, can be evaluated upon how well its goals and objectives are supported by the strategies and initiatives that have been identified. When a given objective is supported by initiatives with high risk, it is less likely to be achieved.

Therefore, the objective targets should be analysed and adjusted to represent more realistic expectations based upon the identified risk.

Another option, to compensate for the potential impact of high-risk initiatives could be adding lower risk initiatives that support achievement of the original objective targets. Often, risk mitigation will lead to the identification of additional initiatives to counter the impact of risk. In particular, when addressing risks that a given strategy might have on the organisation.

New risks, dynamic updating

During the execution phase of the strategic planning lifecycle, when a new risk is identified, the plan is then reassessed to evaluate the overall impact.

Where necessary, mitigation plans should be escalated to leadership, so they can be prioritised appropriately.

Maintaining a more dynamic approach to strategic planning ensures better decision-making and improved strategic outcomes when events jeopardise the organisation’s strategies.

The teams charged with the implementation and execution of strategic initiatives must factor in risk to the management approach. This is done to minimise the impact of risk on their efforts and, more importantly, on the overall strategic plan. Initiate risk management processes, identify risk, analyse potential impact, employ mitigation strategies, and monitor results.

Key mitigation strategies are escalated when required. And initiative risk is propagated to the strategies and strategic objectives, so that the impact of initiative risk becomes risk to the strategy and its objectives.

Quality decision-making

Using a simple and streamlined risk management process will improve the quality of organisational decision making and increase responsiveness to threats.
Finally, a given strategy can significantly impact ongoing operational success.

Organisations must consider the risk of potential impact to existing business during planning and implement risk management plans to minimise the potential negative outcome. By assessing the potential impacts of a given strategy, mitigation can begin before the impact of risk is realised.Mitigation strategies, including the identification of additional initiatives to overcome identified impacts, can eliminate the risk before it becomes an issue.

Mandeya is an executive leadership coach, trainer in human capital development and corporate education, a certified leadership and professional development practitioner and founder of the Institute of Leadership, Research and Development (LiRD). — robert@lird.co.zw/www.lird.co.zw.

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