Strategic plans are all about possibilities, but the possibility of risks getting in the way is also part of the equation. Knowing that there are risks and knowing that they can impact financial performance means that choices must be made. Those choices are better made after reaching as much clarity and alignment as possible, especially in a changing or uncertain environment. Stakeholders who follow a defined process to address the most concerning risks and their effects on financial performance have more clarity and confidence in how resilient their plans are and whether they need to be adjusted.
Step 1: Agree on risk appetite and current level of risk
This step not only allows decision-makers to articulate their appetite for different types of risk but also fosters alignment around how much risk is present. Start by identifying your major areas of risk, then determine how much risk various stakeholders are comfortable with each area and how much risk they perceive the institution has taken on. This is a targeted way to uncover where risk appetites and perceptions of current risk diverge so they can be brought out for discussion. The value is in the conversation, which typically leads to better alignment.
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