Risk and Strategy in Organizations: Analysis and Strategic Planning

This report delves into the intricate relationship between risk and strategy within organizational contexts. It begins by defining risks as uncertain conditions, categorizing them into negative (threats) and positive (opportunities) risks, and emphasizing the need for strategic risk management. The discussion covers various risk types, including operational, strategic, compliance, human resource, and technological risks, providing real-world examples to illustrate their impact. The report highlights the importance of risk assessment, outlining the process from risk identification and classification to mitigation strategies. It explores different risk mitigation approaches such as avoidance, reduction, transfer, and sharing, emphasizing the need for a strategic approach to ensure business development and expansion. The report uses case studies to illustrate how organizations like American Airlines and Royal Bank of Scotland have addressed and managed risks to achieve strategic objectives. Overall, the report underscores the importance of proactive risk management in fostering organizational success and achieving strategic goals.

Running head: RISK AND STRATEGY IN ORGANIZATION
Risk and strategy in organization
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Table of Contents
Introduction................................................................................................................................2
Discussion..................................................................................................................................2
Risks:......................................................................................................................................2
Strategy:.................................................................................................................................2
Risks in the business organization:........................................................................................3
Assessment of the risks:.........................................................................................................6
Change in the management process and the associated risks:...............................................8
Conclusion..................................................................................................................................9
References................................................................................................................................10

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Introduction
The risks are the uncertain conditions in the business organization that will bring
constraints or opportunities for the business. It has been seen that there are two types of risks-
negative risks and positive risks. The negative risks are the risks those are responsible for the
threats in the business organization. On the other hand positive risks are the risks those will
bring opportunities for the further improvements in the organization. The mitigation of the
negative risks and the exploration of the positive risks are needed to be done strategically
(Eisend, Evanschitzky and Gilliland 2016). It has been seen that there is a connection
between the risks and strategy in the organization. The managing of the risks in the
organization is needed to be done strategically. The main objective of this paper is to evaluate
the different aspects of the risks and evaluation of the connection between the risks and the
strategy for the expansion and the development of the business for the organization.
Discussion
Risks:
Risks are considered as uncertain conditions those can be raised in the organization
due to various technical and non-technical reasons. It has been seen that there are two types
of risks those can be present in the organization-positive risks and negative risks. Positive
risks are the risks those are responsible for bringing the opportunities to the organization
(Oelze et al. 2016). On the other hand negative risks are the risks those will make constraints
for the further development of the business or functionalities in the organization.
Strategy:
Strategy can be defined as the process that is responsible for the proper development
and the execution of the functionalities in the business organization. A good strategy should
be logical in nature. Apart from managing the business in the organization, strategy should

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also used for the mitigation of the different issues and the risks in the organization. Apart
from that in case of positive risks the proper strategy will deliver the ways to explore the
opportunities through the positive threats.
Risks in the business organization:
Case study:
In order to understand the risks and its relation with the strategy for the successful
compilation of the project, the real world example of managing the projects can be
mentioned. In this context, the mention of achieving the efficiency at the time of the change
by American Airlines can be done. US airlines has understood the insufficiency of the
spreadsheet for managing the data and information. To get the better visibility along with the
maintaining the global priorities, US airlines has adopted portfolio and the resource
management technology for the planning. This results the capitalization of 10 percent of IT
labour to 20 percent. However, achieving the efficiency during the time of change can have
certain risks associated with it. US airlines has adopted proper risk management process in
order to achieve the risks.
The risks present in the organization can be classified into following categories-
 Operational Risks
 Strategic Risks
 Compliance Risk
 Risks related to the human resource management in the organization.
 Technological risks
Operational risks: Operational risks are the risks related to the functionality of the
business. This type of risk is mostly technical risks. However, some of the non-technical risks
such as environmental risks are also included in this case. The operational risks can be both

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positive and negative risk. In case, if operational risks are affecting the functionality of the
business in a negative way, proper strategy is needed to be implemented for the mitigation of
those risks. In some cases, it has been seen that some of the business organization are doing
well through the implementation of new operational strategy. In this case, this can be
considered as a positive risks for some organization as they can adopt the technique from the
other organization regarding the operational improvement.
Apart from that maintain the safety and the security of the employees in the organization
is a part of managing the operational risks in a proper way. It has been seen that due to the
lack of proper safety protocol certain incidents can destroy the systems in the organization.
Strategic Risk: Some of the strategic risks in the organization includes transactional risks,
economic risks, political risks and the internal risks of the organization. It has been seen that
this type of risks are very dynamic in nature. The proper strategy is needed to be made on the
basis of the situation in order to manage the risk (Olson and Wu 2015). As for example if the
economic risks are needed to be mitigated the analysis of the economic situation is needed.
Apart from that managing the transactional risks in the organization needs better
implementation of the secured technology. Managing the strategic risks needs the
brainstorming and multiple solutions can be found out for solving a particular situation.
Apart from that the improvement of the communication is needed to be done in this stage.
The hierarchy of the organization for proper flow of communication is needed to be
maintained (Renn 2017). The flow of communication will help the organization to know the
issues of the employees working in the organization. In this situation, the employees in the
organization should know the organizational structure (Hiebl 2015). This will help them to
reach to the person in the hierarchy to be addressed to solve the problem.

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The lack of communication can raises certain risks for the organization. In this case, the
example of the Deep Water Horizon can be mentioned. In the Deep Water Horizon the main
reason for the incident was then lack of communication. The engineers working at shore were
aware about the poor condition of the cement base. However, they did not let the
management to know that issue.
Compliance risks: Compliance risks are the risk associated with the rules and regulations
in the organization. It has been seen, in case, if the business organization is going to do the
business to the other countries, there may raise a problem regarding the business laws and
regulation (Mutai 2015). This is because the different countries may have different business
laws and regulations. In order to mitigate the problem regarding the business law proper
strategy is needed to be implemented (Frandsen and Johansen 2016). In this case, the
negotiation between the organization and the government of the country can be initiated so
that the business in that respective country does not face any problem.
Risk related to the human resource management: One of the major risks in the
organization is regarding the human resource management. It has been seen that if the
turnover rate of an organization is high the employees will produce negative impact about the
organization. Apart from that the company may face loss as for each of the new employees
the training is needed to be provided for the organization (Bromiley et al. 2015). Apart from
that the productivity of the organization can be affected by the high employee turnover.
In order to mitigate the problem regarding the employee turnover is that the strategically
analysis of the employee engagement scenario in the organization. It is the responsibility of
the human resource management department of the organization to find out the problems and
the issues of the employees and try to solve the problem (Lundgren and McMakin 2018).
Apart from that the issues of the existing employees in the organization can be solved

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through the upgrade their skill through proper training and initialization of different
motivation factors to improve the employee engagement.
Technological risks: The technological risks are associated with the use of the technology
in the organization. It has been seen that with the development of the digital technology many
organizations are realizing that the technology they are using are needed to be updated
(Shanafelt and Noseworthy 2017). In case, if the existing technology in the organization are
not updates in a proper way there is a risk that the organization can lose the position it is
holding the competitive market. In this case, the upgrade of the technology is needed to be
done in a proper way (Olson and Wu 2015). The implementation of the updated technology is
needed to be done in a proper way. In this case, strategic approach is needed to be done in
order to understand the technology relevant for the use of the functionality in the
organization.
Adaptation Enabling Organization to achieve Strategic Objectives
Royal Bank of Scotland has faced problem of managing the large amount of the
financial data through the use of the spreadsheet. In order to achieve this the organization has
adopted the use of portfolio management and the use of the data management system. There
were certain risks associated with this implementation, however, RBS has adopted certain
mitigation plans. The organization conducted a training for the employees so that they could
handle the system properly. Apart from that the bank has recruited technical experts for
managing the system. The decisions were based on the risks assessments done by the
management of RBS.
The risks assessment starts with the identification of the risks. At the initial stage the
identification of the risks can be done on the basis of the issues and the opportunities the
organization is currently facing (Kraiczy, Hack and Kellermanns 2015). Apart from that the

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external market analysis can be done in order to understand if the organization can face
possible risks regarding the competition with the other companies. After the identification of
the risks, the classification of the risks can be carried out (Neugebauer, Figge and Hahn
2016). From this the identification of the positive risks and the negative risks can be done.
After the identification of the risks, the mitigation strategy can be implanted in a proper and
logical way. There are different techniques those can be helpful for the mitigating the impact
of the risks. Three ways can be applied for the mitigation of the risks, these are- avoidance of
risks, reduction of the risks, transfer of the risks and the sharing of the risks.
Avoidance of the risks: The risks can be avoided through taking different steps. In this
case, the chances of the occurring of the risks can be avoided (Hautz, Seidl and Whittington
2017). The strategy has to be made in such way that the business functionality will follow
the path that will be straighter forward and hassle free (Ortiz‐de‐Mandojana and Bansal
2016). However, this kind of strategy making can make expansion of the business limited
into certain territory (Liu and Wang 2016). Apart from that, it can be suggested that for the
expansion of the business and the improvement of the functionalities in the organization,
decisions with the calculated risks are needed to be taken.
Sharing of the risks: In the sharing of the risks, the risks are shared with the other
resources in the organization. In this case, the impact of the risks can be mitigated. However,
this sharing is needed to be done strategically (García-Granero et al. 2015). In some cases,
the transferring of the risks are defined as the sharing of the risks. However, this concept is
not true as in the sharing of the risks, the risks are not avoided. On the other hand, the transfer
of the risk means transferring the existing risks to the other entity.

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Transferring of the risks: the transferring of the risks refers to the transfer of the
existing risks to another entity. It can be said through the transferring of the risk, the risks can
be avoided. This means the transferring of the risks is one type of risk avoidance.
All these techniques of managing the risks are applicable when there is a possibility
that the risks can be handled in a proper way. Apart from that in some cases, the risks cannot
be avoided or handled. In that case the strategy should be made in such a way that the
consequences of the risks on the organization is minimum.
In case of positive risks, the exploration of the opportunities can be implemented by
the organization (Mi 2015). The positive risks indicates the opportunities for the further
improvement in the organization. In that case, the organization can go for some kind of
disruptions so that improvements on the functionality of the organization and the productivity
of the organization can be achieved.
Reporting of the risks: In the risk assessment process, reporting of the risks is an
important part as it will let the management understand that there is a possibility or the
occurrence of the potential risks in the organization. The reporting of the risk should be done
in a proper way. In order to do this the proper organizational hierarchy is needed to be
maintained (Mellahi et al. 2016). Apart from that the management should take the action
immediately after the reporting of the risks based on the priority (Brettel, Chomik and Flatten
2015). After getting notices about the risks, the priority is assigned for each of the risks. The
mitigation processes are needed to be carried out first for the risk with the highest priority.
Change in the management process and the associated risks:
For the change in the management process the example of the US airlines can be
mentioned. This organization has adopted the change and has achieved the efficiency. It has
been seen that some of the employees in the organization were not happy about the use of the

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computerized data and information managing system and some of them were afraid that they
might lose the job. However, US airlines has adopted proper management plan so that the
changes can have the positive results.
Due to the changes in the market places and the way technology is using, a change
may be needed in the organization. In order to make the changes effective, the organization
has to adopt change in the management process. The change can be of different things like
change in the functionality or change in the management process in the organization. In most
of the cases, the change is due to the digital disruption.
It has been seen, in the most cases, the changes in the organization are not accepted by
the employees in the organization in a proper way. In that case, the organization can face the
risk regarding the constraints in the process. There are certain reasons for which the
employees in the organization does not support the changes in the organization. It has been
seen that most of the employees feel insecure regarding the change due to the uncertainty
associated with it. The uncertainty is regarding the loss of the job and not managing the new
system in the organization in a proper way.
In order to handle the constraints in the change management process, the organization
has to take some steps. In this situation development of the proper strategy can solve the
problem. The management in the organization can make the employees in the organization
understand about the need for the changes in the organization (Hoskisson et al. 2017). Apart
from that it is the responsibility of the organization to assure the employees that their job will
be secured due to the change. Apart from that the organization can arrange the training for the
employee’s is that they can handle and manage the new systems in a proper way.

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Conclusion
The discussion is about evaluation of the relationship between the organizational risks
and the organizational strategy. It has been seen there are lots of improvement of the
organizations can be achieved through managing the risks through the right strategy.
However, in order to implement the risk management strategy in a proper way, there are
certain steps to be needed to be followed. The strategy should be made on the basis of the
risks occurred in the organization. In case of the positive risks, the organization can exploit
the risk for the further improvement. On the other hand, in case, if the risk is a negative risks,
the organization can plan the mitigation strategy. Apart from that certain risk mitigation
strategies have been discussed in this paper and the selection of the different strategy are
applicable for the different situations. It can be said that there is a well-defined relation
between the organizational risks and the organizational strategy. Strategy is regarding the
policies for making the functionalities of the organization to run in a proper way. Managing
the risk also included for running the functionalities of the organization properly.
In order to manage the risks and the significance of the risks management, two
different real life examples of the project have been discussed in this paper. One example is
taken regarding the DeepWater Horizon another example of the real life project is
information system implementation at Royal Bank of Scotland. One is failed project and one
is successful project. It has been seen that there was no proper risks management strategy
present in the case of the DeepWater Horizon. On the other hand proper risk assessments was
done in the case of RBS. The significance of the risks management for the success of the
project can be described through these two examples.

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References
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