Strategic risk refers to the potential events or decisions that may make it difficult for an organization to achieve its objectives and strategic goals
. These risks can have severe consequences that impact organizations in the long term
. They can arise from various sources, such as technological change, an evolving competitive landscape, poor management, introduction of new products or services, changes in senior management, unsuccessful mergers or acquisitions, changes to customer demands or expectations, damage to the company's reputation, financial challenges, and emergence of new competitors
. Strategic risk can be divided into two sub-categories: business risks and non-business risks
. Some examples of strategic risks include:
- Competitive risk : The risk of losing competitive advantage or being unable to maintain a competitive edge in the market
- Change risk : The risk of not being able to adapt to changes in the business environment, such as technological advancements, market shifts, or regulatory changes
- Regulatory risk : The risk of non-compliance with relevant laws and regulations, which can lead to fines, penalties, or reputational damage
- Reputational risk : The risk of damage to an organization's reputation, which can result from various factors such as product recalls, scandals, or negative publicity
- Political risk : The risk of political instability, changes in government policies, or shifts in political landscape that can impact an organization's operations or profitability
To manage strategic risk, organizations need to develop a comprehensive, accurate, consistent, and actionable risk management plan
. This involves identifying, assessing, and reducing potential risks that can threaten the achievement of business objectives
. By understanding and addressing strategic risks, organizations can enhance their resilience, improve decision-making, and create new opportunities for growth and success
