Effective Risk Management Strategies and Competitive Advantage

Posted on Feb 14, 2025 in Business Administration and Management (BAM)

Risk Management Essentials

Risk: Likelihood that some event will occur; Impact of event if it does occur.

Process: Identify risks, Assess risk, Plan risk response, Track & Control Risk.

Sources: Internal: due to nature of end item or the process; External: project environment.

Assess the Risk: Consequences, Probability, Impact.

Risk Response Strategy:

  • Transfer: insurance (they pay not you)
  • Avoid: eliminates & replaces with lower risk solution
  • Mitigate: monitor and manage
  • Accept: accept the associated consequences

Risk Tracking and Response: Risk log or risk register, Continuously monitor project.

Set Risk Management Practices and Policies

  1. Risk Management Plan: Specifies methods to identify, profile, assess, monitor, and handle risks; Names the risk officer; Contains a budget and schedule reserve.
  2. Risk Profile: Likelihood, impact, trigger symptoms, monitoring methods, and response strategy for each identified risk.
  3. Risk Officer: Person to oversee the identification, assessment, monitoring, and handling of project risks; Devil’s advocate, Usually not the Project Manager.
  4. Risk Schedule: Time and dollar amount in schedule and budget to cover risks.

Risk Management Practices and Policies: Communicate Risks, Standards and procedures for documenting the project.

Positive Risk or Opportunities: Exceeding/over achieving requirements.


Competitive Strategy

Strategy: Linked to the existence of competition and is the deliberate search for a plan of action that will develop a competitive advantage for the business and putting this plan into practice.

Objective:

  1. To enlarge the scope of your advantage, which can happen only at your competitors expense.
  2. To grow and prosper.

Gauses’ Principles of Competition Exclusion: No 2 species can coexist that make their living in the same identical way (Bruce H. made business analogy).

Basic Elements:

  1. The ability to understand the competitive environment as an interactive system.
  2. Using this understanding to predict the effects of a strategic move.
  3. Commitment of resources to new uses even when benefits are not immediate.
  4. Foreseeing of risks & returns to make a decision.
  5. Willingness to act.

Classifications:

  1. Rule Makers: leaders who build industry.
  2. Rule Takers: companies who render tribute to the industry leaders.
  3. Rule Breakers: write rules to put themselves in a dominant position.

Perfect Competition:

  1. Low profitability.
  2. Many buyers and sellers.
  3. No product differentiation.
  4. No barriers to market entry or exit.

The major difficulties of developing a strategy can be traced back to prediction of the future, applicable experience and insight, or the random process of strategic thinking (SWOT).

Core Competency:

  1. Expendability.
  2. Customer Value.
  3. Competitor Diff.

Porters Attractive Industry:

  1. Threat of entrants is low.
  2. Substitute product is low.
  3. Bargaining power of buyer/supplier is low.
  4. Rivalry is low.