Risk is unavoidable for companies in today's dynamic and volatile global economy. Effectively managing risk means putting failure on the table and boosting risk intelligence.
The uncertainties of planning are well-documented in prose and poetry. "The best-laid plans of mice and men often go awry," wrote Robert Burns (in translation). "When men speak of the future, the gods laugh," says a Chinese proverb. "Prediction is very difficult, especially if it's about the future," declared Niels Bohr. But you don't have to be a philosopher to know that strategic planning is simultaneously important and daunting -- and that planning for the future is no guarantee you'll get the future you expect. It's not unusual, in life or business, to invest a great deal of energy into a desired future state that simply doesn't pan out.
While strategic planning has always been hard, it has been getting harder. According to Geoffrey Colvin's October 2, 2006, Fortune article, "Managing in Chaos," a recent study of S&P 500 companies showed that overall risk levels -- risk to a company's ability to achieve stable long-term earnings growth -- has more than doubled since 1985. In that year, only 35 percent of the S&P 500 faced high risk and highly volatile long-term earnings growth. By 2006, that number had risen to 71 percent. During the same period, the number of companies enjoying low risk and volatility fell from 41 percent to 13 percent.
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