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Managing the Uncontrollable (External risk), Analytic approaches, Group C …
Managing the Uncontrollable (External risk)
Imminent & Manageable
e.g. Infosy recruiting and retention policies
Low Probability of Occurrence & Hard to envision during normal strategy processes
Medium-term
Competitive Risks
Immediate
Nature or Economic disaster
Long-term
Geopolitical and Environmental changes
Analytic approaches
Scenario Planning
For long range analysis
War-gaming
Assesses a firm’s vulnerability to competitors.
Tail-risk Stress Tests
Assess major changes in one or two specific
variables
Group C
Leading Challenges
Reasons
Leaders discount the future
Counter to the “can do” culture
A separate function to handle strategy is needed
Taking risk-management function seriously when the sun is shining and no clouds are on the horizon
Nurturing a close
relationship with senior leadership
Some banks failed while JPM & GS weathered well in the financial crisis
Opposite of the intense
focus of a successful strategy
Risk management is nonintuitive
Rules and compliance can mitigate some of the critical risks
Managers are required to think systematically about the multiple categories of risks