I have written about the need for big businesses to recognise three categories of risk: operational, strategic and external, and I have written about the ways in which the first two categories need to be addressed. In this article I will deal with the third category.
External risks are particularly difficult to manage because of their unpredictability, but ignoring them is not the best approach.
- As with other risks, the first step is to identify them.
- The next step is to ask “What if…”
- Then different possible strategies for dealing with such an eventuality must be examined and an appropriate one (or more) chosen.
One difficulty to be recognised throughout is that various assumptions will have to be made as to what exactly might happen and how it would affect the business. There would also need to be assumptions as to how other organisations or individuals would react.
One approach is to conduct a series of “war games” from time to time to test the business’s ability to respond and to learn lessons before being tested in real life. Sometimes these can be highly realistic, but often they have to be confined to desk-top exercises.
Whilst no method is foolproof, organisations are generally strengthened by conducting any such exercises.