Why is risk management and strategic planning imperative?

First of all, strategic planning is a written document or a formalized road map that points out the way forward for your business. It describes how your company executes the chosen strategy and points out where your business is going over the next few years or more and how it is going to get there. A strategic plan is also a  management tool that serves the purpose of helping an organization do a better job because a plan focuses the energy, resources, and time of everyone in the organization in the same direction. It can also help your organization to uncover ways on how to improve performance. Strategic planning also allows the organization to identify it’s SWOT (Strengths, Weakness, Opportunities and Threats) which can help you make the most of what you have got to your organization’s best advantage.  For instance, it sparks insights about how to restructure your business so that it can reach its full potential and reach its goals. 

It also does the following: 

• Helps build your competitive advantage: Costs provide you with an important competitive advantage. By becoming a low-cost producer, you can offer customers prices that your competitors may not be able to match. If you can offer low prices while maintaining quality, you can strengthen competitive advantage further. This is called USP (unique selling proposition). It is a slogan that differentiates a product or service from its competitors. A USP may include words such as the “lowest cost,” “the highest quality,” or “the first-ever,” which indicates to customers what your product or service has that your competitors do not. Using a USP is a great marketing tool to help position and sell your product and make your products or services stand out from your competitors. Some marketing experts go even further and believe that unless you can pinpoint what makes your business unique in a world of homogeneous competitors, you can’t target your sales efforts effectively. 

To achieve that, you need to make sure that you have a good tagline since it will effectively summarize the full USP in one sentence to make it impactful and digestible. Secondly, try extensive market research. Establish a strong connection with your customers to figure out what motivates their buying decisions and what they care about. Furthermore, Having a clear understanding of what makes your company special from the very start will help you grow faster, as more customers will buy from you, and achieve a better brand recall.

• Prioritizes your financial needs: A financial plan is nothing more than a road map that will help you reach your financial goals. And like any journey, you can mess up, change your mind, start over, and get better the further along you go. But the map gives you a touchstone for the trip so you don’t get too lost and can always find your way back no matter what happens. When creating your financial plan, the most natural place to start is to set some goals; short-term, medium-term, and long-term. Goals show you where you want your money to go, and a budget shows you where it’s actually going. Not only do you need a budget, you need a budgeting system.
• Communicates your strategy to staff: We’re often asked ‘what’s the most important thing to focus on when it comes to an internal communications strategy?’. We think it’s simple: put your employees at its heart. Talk to others as you’d like to be talked to yourself and remember to Make it simple. Hold monthly or weekly meetings or discussion sessions with your employees to get their opinions on the strategy as well and make them feel included. 

Secondly, Planning on how to handle unexpected events in advance can help the organization to be ready if they arise. To ensure your organization’s success, a project manager needs to know how he or she will handle potential risks so that they can identify, mitigate or avoid problems when they need to because achieving a project’s goals depends on planning, preparation, results and evaluation that contribute to achieving strategic goals. Risk management also creates financial benefits. With trend analysis, risk managers can spot high-frequency events and work to minimize repetitive losses. In order to reduce those unexpected risks and how to handle them when they arise, you will need strategies such as CAPA (Corrective Action Prevention Action), 5W1H and more for your business. 

Corrective Action Preventive Action (CAPA): In short, CAPA is a systemic strategy to reduce risks and improve processes. Corrective Action, Preventive Action provides a structured approach to identifying potential problems and their root causes, devising solutions for those problems, and documenting the solution so that similar issues don’t arise in the future. Corrective action addresses a current problem meanwhile preventive action addresses a problem that can occur in the near future.

For instance; if the intent is corrective in nature i.e. if the meaning is designed to fix the present issue then that would be called Corrective Action. If the intent is preventive, i.e. if the meaning is designed to prevent such issues to occur in the future then that would be called Preventive Action.

5W1H: 5W1H is the abbreviation summarising the following six questions: What? Who? Where? When? Why? How? The 5W1H method has many applications, very different from each other. It is perfectly suited, by virtue of its simplicity and versatility, to a variety of structures, configurations and problems, and so it can be used at all levels of the business:

• At the strategy level to design or improve a market penetration strategy, for instance;
• At the management level to improve organisation and processes during brainstorming sessions;
• At the quality level as a problem-resolution support tool;
• At the innovation level to boost the emergence of solutions and ideas in the cause of progress;
• At the project management level generally.

The strength of the 5W1H method lies in four key attributes:

• Systematic: the key to success is to always ask all the questions, each and every time.
• Comprehensive: the method can be used to obtain a 360° view of the problem and detect the route to resolution.

Planning risk management ahead can not only save time but also effort you put into achieving the goals. It can save time by knowing how to solve the unexpected risks when it happens as you have planned the risk management plan ahead of time.