ABSTRACT
This chapter establishes that Strategic Risk – the “biggest risk of all” – is a problem of governance that derives from definitional ambiguity and the recourse to obsolete paradigms. The chapter explores the extent of the problem, particularly in the light of recent market experiences, and articulates a solution. The solution offered is derived from recognition of the idiosyncratic qualities of Strategic Risk and application of a paradigm of strategy that is better suited to decision-making in conditions of uncertainty. Its value is that the solution offers a robust argument for substantive investment in innovation and a disciplined and prudent approach to innovation activities.
Decision-making in Strategic Risk demands a representation of the problem that evolves, frames uncertainty and invests it with relevance, so that activities can be put in place that over time will furnish data, information, intelligence and the capabilities to mitigate, adapt, innovate and, where opportune, commit to new business models. Decision-making, when it comes to Strategic Risk, is therefore exercised over an extended time frame. The notional starting point in the cycle is the identification of relevant strategic risks; this then demands a mandate to articulate a portfolio of strategic options; the options will eventually lead to new strategic commitments that will rest on a reconceptualisation of the business identity. At this point, a new cycle begins.
Having thus established a robust conceptual framework for the management of Strategic Risk and the leveraging of strategic innovation, the chapter reviews general principles for developing capabilities, embedding processes and designing tools.
