Strategic risk: Guide for directors

This guide has been produced by collaboration between the civil engineering and actuarial professions, and:

• Shows why managing strategic risk needs a different approach
• Outlines a recommended methodology
• Stresses the necessity for the board to provide risk leadership and create the right culture, internal communications systems and risk-management frameworks
• Discuss how to proceed in practice and outlines constructive tools.

Development was underpinned by a research programme undertaken by the Universities of Bath and Bristol and supported by a ‘Partners in Innovation’ grant from the Department of Trade and Industry. The approach outlined in this guide is supported by more detailed information contained in the accompanying CD Rom and includes a number of case studies to further illuminate the ideas put forward. 

This guide distinguishes two types of strategic risk: 

• Foreseeable risk that can be managed in traditional ways
• Unforeseeable risks and uncertainties, which need to be managed within an open and questioning culture, involving staff at all levels, continually seeking to understand what may happen and developing responses which will be robust in a variety of future circumstances.

Among the practical steps recommended are:

• Examination of the key processes already embedded in the organisation to see whether they contain hidden strategic risks
• Adequate ‘follow-through’ from risk identification
• The use of tools such as horizon scanning, concept mapping, pattern recognition and risk grouping. 

It concludes with a self-assessment check, to assist readers to ascertain whether their own organisation needs to review its risk management procedures. There is also a checklist of the strategic risks that have been identified in the course of research.

The guide is aimed at directors of enterprises in public and private sectors, senior management, risk managers, members of the actuarial and civil engineering professions, project managers, students on risk management courses, consultants and civil servants.

Reading this guide and adopting the guidance given will enable you to deal more effectively with strategic risks in your organisation. If applied successfully, your shareholders will be reassured, your board and executive management team will be more confident, and your staff will feel more secure.