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A risk‐based approach to strategy execution

A risk‐based approach to strategy execution Purpose – This article integrates strategy mapping, risk management and management control into a risk‐based approach to strategy execution. It uses strategy mapping as a tool to visually depict the firm's strategy and then assess its risks. Based on this risk assessment, the firm's management control system is designed to manage those risks which are seen to have the greatest probability to negatively impact firm profitability. The proposed framework can be used on a stand‐alone basis or be used to complement Kaplan and Norton's work on strategy mapping. Design/methodology/approach – This article draws from the confluence of the risk management, management control, and strategy mapping literatures to illustrate how firms can improve their handling of risk. Findings – Strategy mapping is an effective tool to identify risks, while Simons' Levers of Control provides an effective alternative to manage the risks identified. Practical implications – A firm's future profitability depends on its ability to identify and manage risk. Given that firms only profit when they successfully manage risk, the design and application of its management control system must flow from an assessment of the risks assumed in its strategy. The primary advantage of an integrated risk‐based management control system is that it allows managers, in real time, to steer the firm towards the good things that were outlined in its strategy and away from any bad things. Originality/value – The article extends Kaplan and Norton's work by proposing strategy mapping as a tool to identify and then to help manage risks. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png Journal of Business Strategy Emerald Publishing

A risk‐based approach to strategy execution

Norman T. Sheehan
Journal of Business Strategy , Volume 31 (5): 13 – Sep 7, 2010
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References (13)

Publisher
Emerald Publishing
Copyright
Copyright © 2010 Emerald Group Publishing Limited. All rights reserved.
ISSN
0275-6668
DOI
10.1108/02756661011076291
Publisher site
See Article on Publisher Site

Abstract

Purpose – This article integrates strategy mapping, risk management and management control into a risk‐based approach to strategy execution. It uses strategy mapping as a tool to visually depict the firm's strategy and then assess its risks. Based on this risk assessment, the firm's management control system is designed to manage those risks which are seen to have the greatest probability to negatively impact firm profitability. The proposed framework can be used on a stand‐alone basis or be used to complement Kaplan and Norton's work on strategy mapping. Design/methodology/approach – This article draws from the confluence of the risk management, management control, and strategy mapping literatures to illustrate how firms can improve their handling of risk. Findings – Strategy mapping is an effective tool to identify risks, while Simons' Levers of Control provides an effective alternative to manage the risks identified. Practical implications – A firm's future profitability depends on its ability to identify and manage risk. Given that firms only profit when they successfully manage risk, the design and application of its management control system must flow from an assessment of the risks assumed in its strategy. The primary advantage of an integrated risk‐based management control system is that it allows managers, in real time, to steer the firm towards the good things that were outlined in its strategy and away from any bad things. Originality/value – The article extends Kaplan and Norton's work by proposing strategy mapping as a tool to identify and then to help manage risks.

Journal

Journal of Business Strategy – Emerald Publishing

Published: Sep 7, 2010

Keywords: Strategic management; Risk management; Risk assessment; Strategic planning; Performance management

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