Report highlights importance of looking past short term challenges

A report by the Economist Intelligence Unit, Getting New Perspectives on Strategic Risk, highlights the dangers of adopting an unbalanced focus on the short term during strategic planning and risk management processes – a focus which tends to be encouraged by today’s institutional and incentive structures.

The report explores current approaches to long-term strategic planning and risk management and¬†finds that today’s challenges, such as the euro zone crisis and concerns of a double dip recession, risk taking over strategic planning processes and eclipsing¬†important long term priorities. ¬†The danger is that this damages firms’ chances of sustainable success in the future.

Based on a survey of 500 global executives, some of the key findings from the report are:

– Long-term risk management is rising on the agenda for many business leaders

– Links between risk management and strategy are strengthening in many organisations

– Many companies are using scenario planning, but few embed it into the overall strategy process, only 20% of respondents say that scenario planning plays a vital role in helping their company to formulate and adapt strategy in uncertain times.

РThe time horizons for strategy and risk are often misaligned.  Risks are generally considered over much shorter time frames, so that companies are making long-term strategic plans without a proper consideration of the associated risks.

– Risk functions need to do more to challenge entrenched views of the future.

Further details can be found here.