Exploring the strategic risk frontier

This article urges executives to expand their view of risk. Instead of just defending against bad risk events, leading companies define and anticipate the upside risks that, when well managed, can deliver the maximum rewards. The discipline of strategic risk management allows firms to raise their growth potential in addition to reducing their economic volatility. The author shows executives how to avoid the biggest risk of all – not taking the right growth risks for the business. Businesses today are exposed to greater risks across the board, ranging from political risks to product liability and environmental hazard risks. There also are a set of strategic risks that have become increasingly disruptive. These include not just the obvious high‐probability risks that a new ad campaign or new product launch will fail, but other less‐obvious risks as well in areas such as technology and customer needs. Failure to anticipate and manage this spectrum of strategic risks can expose a company to dramatic decreases in shareholder value and severe swings in stock prices. In today’s risk‐intense environment, firms must manage their economic and risk profiles more actively. The goal is not to eradicate risk, but to deliver the maximum reward for an acceptable level of risk. The author addresses some of the most important forms of strategic risk and the countermeasures that can be used to address them.