Business faces some kind of risk in normal course and that is inevitable. What is important is to identify and understand which risk turns out to be a strategic one. Normally such risks arise due to a failure of one or more of your strategy in seven areas. Let me elaborate seven strategic risks facing business:
1. Reputation: This strategic risk is the most critical. Your reputation is your business. If it is damaged your business will never recover. You must ensure that the name of your company, its processes, its products and its image remain always above censure. Recently a Chinese milk powder company went out of business when its products were found to contain chemicals injurious to human life. When this happens business must take every effort to neutralize bad press, news or propaganda while at the same time making amends to the damages already done
2. Regulatory: In the case of risk of reputation business has control over what it can do about it; in regulatory risk business faces situations beyond its control. As a strategic risk regulatory aspects can be debilitating. Recently, Blackberry a mobile and smart phone device sold by Canadian company Research in Motion (RIM) has to face spate of restrictive regulations in several countries. Effective negotiations, compliance with regulations along with ensuring that such regulatory rules do not recur are few of the risk control measures recommended
3. Technology: If you are in IT you know that technology is changing hour by hour. Today technology is the main strategic risk for businesses in internet and communications. Look at how Microsoft was losing its internet search engine market. Google’s adoption of Android Operating System gives endless hours of worry to search engine Bing. Updating and bringing still better technology are measures to neutralize this strategic risk
4. Marketing: Strategic risk in marketing has time limitation. When a business introduces novel marketing strategy it will have upper hand for some time. By and by its competitors would also introduce similar strategies bringing the score to even. Sticking to a single marketing strategy for promoting your products is therefore not possible. Look at the cola war that continues between giants Coca Cola and Pepsi Cola. Both are engaged in aggressive marketing campaigns including targeted advertisements against each other and heightened marketing strategies adopted to secure advantages. The one who blinks will be eliminated. So the war continues forever
5. Finance: This is a strategic risk that affects every business small, medium and large. Small business has more potency to be destroyed by finance risks than its counterparts in medium and large scale operations. Strategic finance risk arises in many areas and stretch from weak capitalization to creation of financial instruments to manage exposure to risk. Businesses that borrowed large quantum of money by issuing exotic instruments are in for trouble now. They have brought down along with them the lenders, creditors and even governments. Look at what is happening in the Euro Zone
6. Key Person: Insurance companies are smart; they brought the key person insurance pretty long time ago. Business faces this strategic risk when a prominent leader or manager leaves office. High profiled companies assign head-hunters to get their choice of key persons tumbling the companies where these persons previously worked. Though this strategic loss affects companies across the board, the worst mauled are in those in the field of technology, food , travel and tourism. Business must apply several measures to neutralize if not eliminate this strategic threat
7. Cosmic Risk: Cosmics as a risk factor is something new. Cosmics are aspects residing in every person and as an extension in every business. Cosmics can arise in different ways. You have to understand cosmics and turn it to your advantages. Ignoring cosmics can lead to failure. An interesting example is the James Bond film series. Albert R Broccoli produced 16 films in the James Bond series where he portrayed Bond as a male chauvinistic spy. After his death in 1996, his successors diluted this concept and today the appeal of the Bond as a ravisher tinged with magnetic personality has evaporated.
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