There are certain industries flush with risks. The airline industry is one such that operates within a macroeconomic climate of uncertainty. Some industries and companies actively plan for risks such as the threat of substitutes or new market entrants, but it is never really enough. When things actually go awry, companies, societies or economies rarely have the right backup plan to take control. So a new concept has been developed known as Risk Advantage which entails a conscious better-preparedness for such major disruptions. Risk advantage is actually a combination of competitive advantage and risk return. This risk then gets systematically included right from the stage of the corporate strategy. Unlike risk assessment or management which are reactive, this new system assessed by BCG, goes well beyond merely ticking any checklist. To ensure this is a success, BCG has provided a list of four major fallacies that need to be overcome. To start with, the ERM (Enterprise Risk Management)mentality needs to be weeded out. Planning circles must not be dictated by time of the year or fiscal calendars but by what is required for the business. Herd mentality is also something that goes against the grain of business transformation. Companies also make the mistake of going by deterministic thinking. Instead they must go probabilistic, based on hard data evidence and subsequent business analytics being used.

Source:https://www.bcg.com/publications/2017/taking-advantage-of-risk.aspx?linkId=51526094

Uploaded Date:05 June 2018