Boards of Directors and shareholders are increasingly focused on understanding what generates the volatility in companies’ earnings, and by how much. Their concerns are justified. The financial crisis was a wake-up call for all companies to improve their strategic planning, performance management, risk identification and mitigation in a combined transformational programme. Ongoing volatility and uncertainty in the operating environment is jeopardizing many previously strong business models. Increasingly, as risk-aware executives look to improve their management of this uncertainty and ensure that they are making informed strategic decisions, competitive markets are prompting them to recalibrate their businesses. However, they often find that their expectations quickly become outdated and are therefore difficult to explain to key stakeholders.
Developing a culture that is conscious of risk-return calculations isn’t easy. However, there are approaches and actions which can help executives make risk-informed decisions and realise the potential rewards.
