A Systematic Approach to Leverage Business Risks

Managing business risk is challenging and even the most successful companies have struggled in dealing with these challenges. Extant literature has focused on risk management strategies based on the ability to control the risk. This two-tiered multi-method research involved in-depth interviews of 20 C-suite leaders and a survey of 181 senior executives. We complement the research findings with perspectives from extant literature along with analysis of topical business events. Our research identified the multi-dimensional nature of business risk, spread across seven different facets. However, we found that organizational risk management efforts are based on existing knowledge and experience and are limited by the cognition of the risk. We thus propose that risk management efforts should focus on not just the controllability, but also the cognition of risk. We depict this in the form of a risk management landscape along the two axes of controllability and cognition, involving four zones of risk management, viz impact zone, battle zone, blind zone and defenseless zone. We develop a systematic approach towards risk management across these four zones, with distinct objectives, mitigation strategies and focus on risk dimension across each. We illustrate how this shift in risk management from the episodic to a more systematic approach has helped different organizations and demonstrate that the risk management landscape is amenable for deployment across different sectors and companies and for different types of risks. We draw out a four-step template as a ready guide for executives to implement within their organizations whilst dealing with adversity and business risk.