You hear and read a lot about strategic risk these days, and for good reason. A recent study of business failures by Booz and Company concluded that 80% of the loss of shareholder value is due to a single cause: underestimation of strategic risk.
But what does that really mean? “Strategic risk” is a catchall category for risk associated with changes in the economic, political, demographic, technological, and competitive environments.
That is a very formal and antiseptic way of discussing a much more down to earth reality. Most of the time when disaster strikes it is because somebody didn’t recognize that the light at the end of the tunnel was the headlight of the oncoming train.
When you strip away the layers of business school speak, strategic risk arises when the world changes or is about to change and you don’t notice. Failure is not something that happens to you. Failure is something that you allow to happen.
The only way to really improve your management of strategic risk tomorrow as well as today is to change your relationship with the knowledge you depend on.