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How Strategic Planning contributes to the Risk Management

How Strategic Planning contributes to the Risk Management

Jun, 27, 2014
by Rod Farrar

Hello and welcome to this session. Today I want to talk about something more advanced and that is how Strategic Planning actually informs the Risk management section of your organisation. Ordinarily we hear that risk management needs to be part of the strategic and business planning framework and that is absolutely true. One of the things that is not well understood is how strategic planning actually contributes to the development of your risk management framework.

Now, the way that I look at it is this, every organisation has a vision but what I don’t think too many organisations understand is that that vision is telling us what do I want to be when I grow up as an organisation. We then as a question, if I get to that point, what does success look like? And if I know what success looks like when I get there, that gives me the ability to ask the question – how do I measure it? Now if I then ask how I can measure it, I will ask what am I going to measure it against? It might be that you measure it against financial performance, market share, regulatory framework/compliance, safety, the environment, political. Once you have done that, what you have actually identified are your critical success factors. Those critical success factors actually form the columns for your consequence matrix. By asking the question, what does success look like and how do I measure success you have identified your critical success factors. We then look at the performance measures against those and what are the key performance indicators that I am going to measure against all of those? Therefore you have also set your performance management as well. The next question we ask is where am I now? You can have a look and say this is where I am now, this is where I need to be, this is what I need to do to plot that. That then sets the basis and the preconditions for establishing your strategic direction and also the bite size chunk in your business plan to get there.

So what is really cool about asking this one question, what does success look like when I get to when I grow up as it sets not only the parameters for your risk work around consequence, it also sets the parameters around your performance management program and allows you to measure where you are now so that you will know whether you actually achieve what you want to be when you grow up.

But here is the thing, no business should achieve their vision. The reality is that we should always want to be growing as an organisation. So we should always strive to be better, stronger and faster. So we should never reach that vision, our vision should change as we mature as an organisation as we get better at what we do. That way we are always striving to be more and more as we grow up. Those organisations that reach their vision and say “wow I got there” are likely to stagnate and not to be around in the next few years. So fundamentally, what do I want to be when I grow up, what does success look like when I am there and how do I measure that? If you do that then the strategic framework for your organisation it will all fall out of those questions. That’s all I’ve got for this session, so as always, let’s be careful out there.

Written by Rod Farrar