Risk & Opportunity Management

Opportunities and risks are two sides of one stone - 
Let's dive into the sea of risks and opportunities. The COVID-19 pandemic, today’s war in the Ukraine and in Palestine, the effects of climate changes and unpredictable political reactions of governments made it clear. Economic movements no longer follow known patterns or steady flows. Instead, they are driven by abrupt changes in the environment that occur at increasingly shorter intervals. The dangers arising from these changes must be recognized in good time. This requires forward-looking thinking that encourages sustainable actions.  It is therefore important to make out the first signals of change and thus possible chances and risks at an early stage. Only by doing so, it is possible to realize favorable opportunities in due time.

Do you know the situation: Everything is running smoothly and to your satisfaction. Suddenly an important preliminary product cannot be delivered; a competitor offers a better product at a lower price; an important customer goes bankrupt; key employees leave the company. The incidents are manifold, the effects are disastrous.

Management errors are inexorably uncovered at the latest when the insolvency application is filed. Either risks were underestimated or opportunities were not recognized. As a rule, the main causes of a company's downfall lie in its poor strategic orientation.

Significant influencing factors in company crises are:

• The strategic orientation of the company is not being continuously reviewed. Especially with regard to the current megatrends, this behavior can lead to strategic failures.
• Management overlooks early warning indicators – as well for operational risks and operational disruptions as for strategic business opportunities. Early warning concepts assume that even unexpected developments have their preliminary causes and that these can be identified at an early stage as so-called 'weak signals' (Ansoff). If these early warning indicators are not recognized in time, the reaction time may be dramatically shortened.
• Crises and business failures can also be caused by insufficient control of supervisory bodies. This failure is encouraged by non-transparent business operations and confusing corporate structures.
• An inadequate risk culture is another critical factor that encourages poor decisions and the negligence of risks. In these cases, critical discussions and addressing hazards and risks are usually avoided in the company.

To avoid the above-mentioned mistakes, it is necessary to implement a regular opportunity/risk strategy. The possible influencing factors must be identified, assessed and incorporated into strategic decision-making.