Your risk management process: is it the right one?

This is the fifth in our series of blogs describing our approach to strategic planning. In this instalment we offer an approach to your risk management process which also addresses the exploitation of opportunities.

You can find our series of blogs on how to write a strategic plan that seriously improves your business performance here. They include an explanation of the innovative strategic and operational planning model the Business Lifesystem® which simplifies and streamlines the strategic planning process for complex organisations.

1. Strategic planning process: how to meet business challenges head on

2. The best of the business planning tools: The Business Lifesystem®

3. Your business management system: know your business drivers

4. Business planning: the important things you didn’t know

5. Your risk management process: is it the right one?

6. Strategic planning: how to ensure delivery of your planned strategy

The link between the risk management process and prospect management

Effective strategic planning requires the identification and mitigation of risk and the identification and potential exploitation of opportunities.

The Business Lifesystem® strategic planning model addresses these aspects by identifying

• the positive impact of opportunities aligned with strengths (a PROSPECT)

• the negative impact of a threat combined with a weakness (a RISK).

The risk management process

When an external threat aligns with an internal weakness creating a potential negative impact on the business then this creates a risk to the business. The identification of risks to the business generates a need to develop an organisation’s risk management process.

Such risks must be quantified in terms of their potential impact on the business and the likelihood of them occurring. Mitigating actions can then be identified and carried out in order to reduce, overcome or eradicate the negative impact on the business.

Strategic prospect management

When an external opportunity aligns with an internal strength creating a potential positive impact on the business then this creates a prospect for the business.

Such prospects can be quantified in terms of their potential positive impact on the business and the likelihood of them occurring. Proactive managing actions can then be identified and carried out in order to maximise the positive impact on the business.

The risk management process, prospect management and SWOT analysis relationship

This diagram demonstrates the relationship between the SWOT analysis, risks and prospects.

• An internal Weakness which aligns with an external Threat creates a possible risk for the organisation. This requires a risk management process.

• An internal Strength which aligns with an external Opportunity creates a prospect for the organisation. This requires active prospect management.

Strategic planning requires the identification and mitigation of risk: the risk management process.

This operates in combination with the identification and potential exploitation of opportunities: strategic prospect management.

The Business Lifesystem® strategic planning model addresses these aspects of positive impact prospects and negative impact risks.

Next steps

Our next blog addresses how The Business Lifesystem® helps to deliver the strategy which has been devised.

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