Strategic blind spots have always brought down massive
business transformation projects and there have been innumerable statistics to
support this
A 2024 study conducted by Bain & Company revealed
that 88% of business transformations fail to achieve their original ambitions
A 2024 Forbes article reported that between 60% to 90% of
business strategies fail before they are implemented
Research by Bridges Business Consulting in 2024 indicated
that only 2% of leaders are confident in achieving 80–100% of their strategic
objectives, underscoring difficulties in strategy execution.
Directors and executives will eventually see strong room for
improvement in intertwining strategy and risk. While leaders double down on
vision and execution, the hidden killer is often a lack of risk integration at
the strategy level. In a volatile environment, ignoring risk is extremely
expensive.
These outcomes often stem from strategic decisions made on
fragile assumptions and blind spots in risk foresight — history proves this
time and again
2008: Lehman Brothers' collapse was largely due to
its significant exposure to subprime mortgages and complex financial
instruments. The firm's failure to adequately assess and mitigate these risks
led to its bankruptcy, marking a pivotal moment in the global financial crisis.
2001- Enron's downfall resulted from widespread
internal fraud and the use of complex accounting loopholes to hide debt. The
company's lack of transparency and poor risk management practices led to its
bankruptcy and the dissolution of its auditing firm, Arthur Andersen
2012 - Kodak, once a giant in the photography
industry, failed to adapt to the digital revolution. Despite pioneering the
first digital camera in 1975, the company was reluctant to shift focus from its
profitable film business. This hesitation allowed competitors to dominate the
digital market, leading to Kodak filing for bankruptcy in 2012.
2019- PG&E, a major California utility
company, filed for bankruptcy due to liabilities exceeding $30 billion from
wildfires caused by its equipment. Despite efforts to improve safety, the
company failed to adequately address the risks posed by aging infrastructure
and environmental changes, leading to devastating fires and financial collapse
Organizations often operate with concurrent tracks: strategy
on one side, risk on the other. Strategy focuses on the “what” and “where,”
while risk focuses on the “what if.” Without the appropriate integration,
strategy becomes like tall building set up on an extremely weak foundation
To future-proof strategy, risk forecasting must be central
to strategic planning. Here are four indicative ways to make that happen:
Challenge assumptions early
What foundational assumptions define the contours of the strategic
plan, and how are they validated?
What internal and external dependencies are critical to
achieving the goals, and what is their reliability?
Are there any beliefs or expectations which are taken for
granted that could pose risks if they prove incorrect?
Quantify the downside
What are the potential worst-case, best-case, and most probable
scenarios for the strategy?
How would each scenario impact the financials,
operations, and market position?
What is the likelihood of each scenario occurring?
Include risk leadership in strategic planning
Are risk management leaders involved from the inception
of strategic planning?
How are risk assessments integrated into the strategic
decision-making processes?
Do cross-functional teams include risk professionals to
evaluate strategic initiatives?
How frequently are risk assessments reviewed and updated
in alignment with the organization’s strategic objectives?
Design for Adaptability
How quickly can the organization pivot its strategy in
response to emerging risks or new opportunities?
What processes are in place to enable continuous
monitoring and adaptation of the organization’s strategic plan?
