Circle motif theflipside

Perspectives

Strategic resiliency

Striking the right balance between protecting and creating value

Aligning strategy and risk allows organizations to exercise “strategic resiliency”. And strategic resiliency can increase a company’s chances of success—even amid uncertainty.​

What is “strategic resiliency”?

Accelerated economic cycles. Exponential technological advances. Increased competition. Changing customer demographics and preferences. Increased shareholder activism. New industry and regulatory requirements. Geopolitical uncertainty. These factors, along with many more, pose challenges to effective strategic risk thinking.

But for many organizations, risk management tends to have a more operational than strategic focus. And risks tend to be addressed only after they occur.

By focusing solely on mitigating risks and preventing the recurrence of a risk, companies face a slow-down in the decision-making process. Companies that align strategy and risk are better able to exercise “strategic resiliency:" The ability to anticipate, know, and act on risks when introducing or executing new strategies to increase the chances of success—in spite of uncertainty.​

Back to top

elastic rubber

How does a strategic risk framework help strategic resiliency?

Strategic resiliency is rooted in a framework designed to strike the right balance between value creation and value protection. Applying a risk lens to strategy helps companies understand which risks provide opportunities for long-term value creation and which to protect against.

Optimizing value on a risk-weighted basis, companies should first make sure they have a strong enterprise risk management program as the foundation upon which to build (e.g., having a risk governance and reporting cadence, and standardizing and deploying enterprise-wide risk management processes with regard to operational, strategic, financial, and compliance risks; risk responses; and mitigation plans).

Back to top

tape bundle

What are some approaches an organization can take?

Uncovering potentially disruptive or innovative strategic risks with little or no historic precedent generally requires a different approach than traditional risk discovery methodology and processes.

Companies should also take the time to focus on “what’s next” with scenario planning, which can provide strategic options and flexibility should the industry, market, or company face unexpected change. The value in the face of potential disruption or other changes and how the company will sustain its competitive advantage and continued resilience may be considered as well.

Creating strategic resiliency also requires risk valuation modeling for each scenario, where the underlying circumstances can be assessed for various levels of uncertainty and risk, to yield a range of outcomes and the likelihood of each outcome. Companies can compare outcomes for each risk-adjusted alternative and select the alternative that provides the optimal risk/reward profile.

True strategic resiliency requires a clear understanding of risk tolerance. The company outlines which strategic objectives are supported in taking risks and when putting strategic objectives into action, keeping within agreed-upon risk limits.

For all companies, there are still chances that unexpected events will occur. Companies should consider formalizing a crisis response program and framework and be prepared to respond effectively. Having a vigorous, coordinated response to incidents can limit lost time, money, and customers, as well as damage to brand and reputation and the costs of recovery. Crisis response programs should also include steps to normalize operations, which may mean a change in strategy.

Organizations should tap into the insights of boards. As a diverse group of highly experienced individuals, these seasoned leaders can provide an “outside-in” view, offer broader perspectives, and be essential partners in achieving strategic resiliency with management.​

Back to top

flexible pencils

What questions should leaders ask to get started?

  • Have strategic risks been identified by management and has the board provided input?
  • What mechanisms does management have in place for risk sensing and monitoring risks that could result in a shift of strategy?
  • Is the strategy flexible enough to allow for a shift?
  • Does the strategy identify the company vulnerabilities?
  • Is the board confident that management has the right information to make high-stakes decisions?
  • Does the board have the right composition to effectively advise on the strategy?
  • Who is ready to lead if strategic risks aren’t managed?
  • Is the company prepared for a crisis?
  • Has the board engaged with management in a deep-dive, brainstorming session on strategy?
  • Does the board have ongoing conversations with management about the strategy? Are strategy discussions frequently built into board agenda topics throughout the year?​

Back to top

question mark

What are the benefits?

The business environment is rapidly changing. Companies that continually innovate, stay ahead of the risk of disruption, and take advantage of strategic risk (and the opportunities they can signal) have the potential to lead the way.​

Back to top

water splash

This article was adapted from “On the board’s agenda: Framing strategic risk in the boardroom,” which was published in The Wall Street Journal’s Risk & Compliance Journal on October 19, 2016, and whose contributors include: Andrew Blau, managing director, Deloitte Risk and Financial Advisory Strategic Risk Solutions, Deloitte & Touche LLP; Maureen Bujno, managing director, Center for Board Effectiveness, Deloitte LLP; Chris Ruggeri, principal, Deloitte Risk and Financial Advisory, Deloitte Transactions & Business Analytics LLP; and Yeolin Jung, Deloitte Risk and Financial Advisor Strategic Risk Solutions, Deloitte & Touche LLP​.

More from The flip side series

Let's talk

If you’re interested in learning more, please contact us. We’d be happy to schedule a meeting with you and your team.

Mike Kearney
Managing Partner Strategic Risk Services | Deloitte Risk and Financial Advisory
Deloitte & Touche LLP
Profile

Andrew Blau
Managing Director Strategic Risk Solutions | Deloitte Risk and Financial Advisory
Deloitte & Touche LLP
Profile

Keri Calagna
Principal Strategic Risk Services | Deloitte Risk and Financial Advisory
Deloitte & Touche LLP
Profile

Jacqi Fifield
Senior Manager Strategic Risk Solutions | Deloitte Risk and Financial Advisory
Deloitte & Touche LLP


Back to top

Did you find this useful?