I have found that by using these five questions, it is possible to quickly gain alignment and focus on which initiatives are likely to deliver their estimated returns at acceptable risk. There are five risks to assess:
- Strategic Risk. Does this initiative fit in with your broader strategy, or is it an opportunity that could take your business in a different direction? (It’s not always right to discount an opportunity simply because it doesn’t fit in with your existing strategy, but you need to make a measured decision.)
- Financial Risk. What’s the initial outlay required, and what’s the speed of payback? What’s the financial exposure if the opportunity doesn’t materialize, and can you cope with that?
- Technical and Operating Risk. Do you have the know-how to make this happen and, if you don’t, can you acquire it effectively?
- Competitive Risk. If you make this opportunity happen, can you defend it in the market place and prevent other players from taking the prize from you? Is the idea defendable?
- Cultural Risk. Will this initiative gain the wider support of your organisation, and is there a clear fit between this idea and the rest of your business?
© Stuart Cross 2011. All rights reserved.