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Strategic Risk Management

Many organisations do not have a clear understanding of all risks that exist within their business. They increasingly question what can be done to measure how ‘big’ risks are, and the effectiveness of mitigation controls (including insurance).

What is Strategic Risk Management?

Strategic risk management is a solution that helps organisations understand the full range of their risks in a consistent and logical way, providing tools to address those which could threaten their ability to achieve objectives.

Understanding the likelihood of a risk occurring, and its potential impact, helps organisations understand the cost, effort, time and ultimately, the return on investment of available strategies including:

  • Risk mitigation – reducing the impact of the incident or the likelihood of it occurring
  • Risk transfer – passing the risk onto another party, for example, buying insurance or contractual terms with suppliers
  • Acceptance – accepting the risk when unable to reduce the likelihood or impact and still want to undertake the business activity or process
  • Avoidance – removing the chance of the risk occurring by, for example, choosing not to operate in a particular market (business risk), substituting a hazardous or toxic chemical for something non-toxic (hazard risk) or changing operations to avoid the risk altogether (process risk)

What are the benefits?

Strategic risk management provides assistance to help organisations understand risks, allowing them to quantify and measure those risks in a consistent way. This provides a better understanding of the potential barriers that can prevent an organisation from achieving objectives.

It allows the development of a cost effective, focussed and pragmatic programme of risk treatment and risk reduction.

As a result, an organisation’s insurance program can be tailored to meet specific requirement reducing premiums while attaining more favourable terms.

There are a number of potential components to a strategic risk management review, including some or all of the following:

  • Operational risk analysis
  • Risk register
  • RAPID – Risk Assessment, Probability and Impact Diagnostic
  • Risk partner

Contact us:

For further details please contact your local Willis Towers Watson office.

Strategic Risk Management factsheet:

Case study:

A food manufacturer, producing branded products in multiple locations for the European retail and wholesale markets, approached Willis Towers Watson to better understand the risks they face and potential impact should an incident occur.

Using a previously agreed impact and likelihood matrix, risk management specialists worked with senior representatives from across key areas of the business to identify and analyse risk.

This allowed the manufacturer to produce its first formally structured risk register. The tailored register was professional-looking and easy to use, allowing the company to maintain it themselves and present to senior management.

This data also populated a RAPID tool with the results validated through management workshops to complete the process.

Based on the risk register, the manufacturer started addressing the high priority risks, implementing mitigation and transfer strategies where relevant. This in-turn has created more favourable insurance terms.