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Strategic Risks

1 min read
Nov 13, 2018

Strategic risks are threats that come from company decisions that thwart the firm’s long-range goals. Strategic risks have the largest impact on an organization. Failing to address these risks can reduce the lifespan of a financial institution.

Strategic positioning risks are threats of loss that come from marketing plans that do not create a distinct and positive impression for the consumer. Strategic execution risks are those that involve having the appropriate infrastructure, developing advantageous procedures, and hiring the right employees and vendors to achieve company goals. Strategic consequence risks are risks that come from the processes put in place to avoid other risks.

FIs need data on all their business processes, equipment, IT infrastructure, software solutions, employees, vendors, and customers to assess strategic risks. Risk management software can be used to compile and sort the data. It is also used to create reports for further analysis. These reports can be relayed to decision-makers to assist them in strategic planning.

Strategic risks can be difficult to discern because they are based on what might happen in the long-term. The near future is somewhat unknown, but what will happen in the years ahead is even harder to assess. Strategic risks must be assessed nonetheless if the company is to have a secure and stable future. Strategic risk assessment can be accomplished in several ways with the help of risk management software.

Risk management software can play a vital role in strategic risk assessment. The software creates a real-time view of the institution’s risk profile. It can track both financial and non-financial risks within one application. Controls can be monitored through the software constantly so that the bank can strategize based on up-to-date information. It makes communication and reporting easier, alerting management of risks more easily and accurately.

Banks must assess their risks both in the short and long term. When they do, they can take advantage of opportunities to mitigate those risks to be more profitable and achieve their aims.


Related: Creating Reliable Risk Assessments

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