A risk‐based approach to strategy execution

Abstract

Purpose

This article integrates strategy mapping, risk management and management control into a risk‐based approach to strategy execution. It uses strategy mapping as a tool to visually depict the firm's strategy and then assess its risks. Based on this risk assessment, the firm's management control system is designed to manage those risks which are seen to have the greatest probability to negatively impact firm profitability. The proposed framework can be used on a stand‐alone basis or be used to complement Kaplan and Norton's work on strategy mapping.

Design/methodology/approach

This article draws from the confluence of the risk management, management control, and strategy mapping literatures to illustrate how firms can improve their handling of risk.

Findings

Strategy mapping is an effective tool to identify risks, while Simons' Levers of Control provides an effective alternative to manage the risks identified.

Practical implications

A firm's future profitability depends on its ability to identify and manage risk. Given that firms only profit when they successfully manage risk, the design and application of its management control system must flow from an assessment of the risks assumed in its strategy. The primary advantage of an integrated risk‐based management control system is that it allows managers, in real time, to steer the firm towards the good things that were outlined in its strategy and away from any bad things.

Originality/value

The article extends Kaplan and Norton's work by proposing strategy mapping as a tool to identify and then to help manage risks.

Citation

Sheehan, N.T. (2010), "A risk‐based approach to strategy execution", Journal of Business Strategy, Vol. 31 No. 5, pp. 25-37. https://doi.org/10.1108/02756661011076291