Strategic Value of Risk Management
To what extent are risk management practices providing insights for strategic advantage?
To generate higher performance returns, organizations must be willing to take risks. That suggests insights about risks should be important when designing and executing strategies.
In the The State of Risk Oversight Report, which we publish annually in collaboration with AICPA, we ask business executives about the extent to which their organization’s risk management processes are providing strategic advantage—with a particular interest in the extent to which risk considerations are factored into important strategic decisions.
2024 Insights from Data
- Organizations appear to be struggling to integrate their risk management and strategic decision-making processes.
- Less than half (only 46 percent) of organizations substantially consider risk exposures when evaluating new strategic initiatives.
- Most organizations do not view their risk management processes as providing strategic advantage.
- Just about a third (33 percent) of organizations consider risk exposures when making capital allocation decisions.
Discussion Items for Management and Board Consideration
The table below suggests 5 questions that risk leaders can use to prompt conversations with executives and boards about how to better leverage risk management processes as a strategic tool to provide a unique competitive advantage.
| 1. | To what extent is the output of our risk management process an important input to strategic planning? |
| 2. | What is the level of interaction and engagement between our risk management leaders and those making important strategic decisions? Are all the right people included in our strategic planning process? |
| 3. | How clear is the mapping of our enterprise’s top risks to our key business drivers and strategic initiatives? Which drivers or initiatives are most exposed to key risks? What risk might impact multiple strategic objectives? |
| 4. | What could be done to improve our strategic planning process to more formally embed risk considerations into our strategic planning and decision-making? |
| 5. | When budget allocation decisions are made across the organization, to what extent are differences in risk conditions informing our resourcing decisions? |
Related Tools
We’ve created three downloadable tools to help risk leaders integrate risk considerations into your organization’s planning processes.
Click on the resource name to view a detailed page where you can download the tool or template.
