Companies Must Integrate Risk Management with Corporate Strategy, Business Planning

As companies adjust to living in an increasingly vulnerable and interdependent world, leaders must deal with a wide range of risks and make a business resilience plan to address them as part of their overall strategic plan. So said Helmut Meier, Senior Vice President of Booz Allen Hamilton, in summarizing a panel he chaired on "Corporate Risk in the Age of the Unthinkable," held in mid-September 2002 at the World Economic Forum's European Economic Summit in Salzburg, Austria.

Helmut Meier

An increasing number of European companies are now identifying business resilience management and corporate security as key concerns. At this panel, corporate, government, and institutional leaders cited the credit and market risks that evolve from such threats and discussed how to mitigate them without undue impact or cost, while keeping the human component top of mind.

The discussion focused on how an event — and subsequent reactions to that event — can affect an organization's "interdependence risk," that is, "the risk organizations face from unanticipated occurrences within an organization's extended enterprise," according to Meier.

Meier said an organization's enterprise included immediate concerns that ranged from employees, buildings, or plants to its intellectual property and IT networks, as well as extended issues ranging from distribution channels and suppliers to customers and strategic partners.

The risks discussed covered a wide range, from acts of nature (recent European floods, earthquakes) and acts of terror (September 11, other terrorist bombings) to technical or operational catastrophes (plant fires, satellite breakdowns) and economic events (collapse of Enron, WorldCom, and Andersen).

Of particular interest were supply chain issues. "In the wake of September 11, vastly extended supply chains are looked upon in a different light," said Senior Vice President Keith Oliver of Booz Allen Hamilton, another conference participant. "There are now a different set of tradeoffs. For instance, for some U.S. companies, manufacturing in Mexico now looks a lot more attractive than the Far East," he said.

Meier said most companies currently don't recognize risk interdependencies across an extended enterprise and that business resilience investments are not optimized or coordinated across functional areas. "We believe risk management has to be integrated with corporate strategy and business planning and that it has to be integrated into CEO and Board-level decision-making processes to beeffective," he said.

story posted September 2002