Strategic risks differ from other threats that can be faced by organisatons. In particular, they can prompt businesses to adopt new strategies or at least modify the current high-level plans (Deloitte 2014, p. 4)). To some degree, they can make existing long-term objectives irrelevant or obsolete. Therefore, their impact is much more significant. Additionally, they emerge at the time when the managers decide to implement new high-level plans. In contrast, there are various risks that do not necessitate the adoption of new business strategies. For instance, one can speak about compliance risks. This is the main distinction that should be considered.
Overall, the focus on strategic risks has become an urgent concern for managers due to several reasons. At first, business administrators understand that modern organisations work in a very changing environment, and they have to adjust to various external influences. This argument is particularly relevant if one speaks about the changes in technological or economic environment. Moreover, many businesses failed to survive the impact of strategic risks. These tendencies make executives adopt a new approach to risk management. Additionally, modern researchers can better classify various risks that companies can face. Moreover, they can see that some of them should be regarded as the topmost priority. So, this separate group of risks attracts the attention of many business administrators.
Overall, this emphasis on strategic risks has prompted many companies to take several precautions. In particular, executives distinguish strategic risks as a separate group that should be discussed in greater detail. More importantly, they make sure that their businesses develop the key capabilities that can reduce the impact of strategic risks. In particular, they focus on the skills of their employees and ability of the organisation to create innovative products (Deloitte 2014, p. 17). These competencies are critical for the ability of businesses to modify their strategies, especially at the time when their technological or economic environment changes dramatically. These are the key issues that should be taken into account.
Previous strategies had several limitations. In particular, they were more focused on the financial losses that could be easily measured in a quantitative way. Admittedly, this aspect is also critical for businesses, but in many cases, the impact of strategic risks cannot be fully effectively estimated in terms of their monetary value. For instance, one can speak about those situations when disruptive technologies emerge. Very often such threats were not identified, and companies were not ready for these challenges. As a result, many of these businesses weakened especially in terms of their competitiveness; some of them went bankrupt.
It is possible to argue that the introduction of disruptive technologies can be viewed as one of the main strategic risks faced by modern companies (Deloitte 2014, p. 10). Such technologies can render many existing products obsolete. As a result, many enterprises have to develop new business models. In order to address these risks, companies should focus on innovation and talent management as one of the main prerequisites for success. Additionally, it is critical to consider the role of economic changes that can make companies enter different markets. Under such circumstances, they have to develop new products or introduce services that can better suit the needs of people with a lower income level. These are the main issues that can be singled out.
Reference
Deloitte 2014, Exploring Strategic Risk, Deloitte, New York.