Strategic risk is a type of risk that arises from the decisions and actions taken by an organization in pursuit of its strategic objectives. It is the potential for losses or missed opportunities due to the failure to achieve those objectives. Strategic risks can be caused by external factors such as changes in the market, competition, or regulations, or by internal factors such as organizational structure, processes, or culture.
A common example of strategic risk is when an organization fails to anticipate changes in the market or competitive landscape. This could lead to missed opportunities for growth or even losses due to decreased demand for their products or services. Another example is when an organization fails to properly manage its resources, leading to inefficient use of time and money. Finally, strategic risks can also arise from poor decision-making, such as investing in projects that do not align with the organization’s goals.
The best way to manage strategic risk is through proactive planning and monitoring. Organizations should regularly assess their strategies and objectives to ensure they are still relevant and achievable. They should also monitor external factors that could affect their plans and adjust accordingly. Additionally, organizations should have a clear understanding of their resources and capabilities so they can make informed decisions about investments and other initiatives.