Alignment between Foresight, Strategic planning and Enterprise Risk Management
The increasing complexity of the environment, the increase in uncertainty and the dynamics of change force organizations to consider the importance of forward thinking and risk management in their strategic planning.
The European Union Agency for Cybersecurity (ENISA) uses a framework called ‘Emerging and Future Risk (EFR)’ to extend the scope of risk analysis beyond the common risks of horizon #1, towards the medium horizon (#2) and long-term (#3) horizon.
Future risks obviously exist and the particularity of the prospective approach is precisely to take into account the consequences of the future, to consider the risks that the future entails by using the “wheel of the future” for example.
In a report from the Society of Actuaries dating back more than 7 years (2016) it was already noted that the risk management unit assumed a more important strategic role in organizations.
The risk management and prospective or future planning functions have a critical role in the development of the strategy.
Alignment between the Foresight, Risk Management and Strategic Planning functions:
Anticipation of Future Scenarios:
- Foresight provides information about potential future scenarios and trends.
- This information is crucial for both strategic planning and ERM. Strategic planning uses it to shape the long-term direction of the organization, while ERM uses it to identify potential risks associated with those scenarios.
Risk-Informed Strategic Planning:
- Strategic planning should take into account potential risks identified through ERM and Foresight.
- By considering risks, strategic plans can be adjusted to account for contingencies and alternative courses of action.
Integration of Risk Management into Strategy:
- ERM ensures that risks are integrated into the strategic decision-making process.
- Foresight informs this process by highlighting potential future risks and uncertainties that need to be accounted for in the strategy.
Continuous Monitoring and Adaptation:
- All three processes require ongoing monitoring and adaptation.
- Foresight continuously updates the organization’s understanding of potential future scenarios. Strategic planning and ERM processes should be agile enough to incorporate new information and adjust strategies and risk management approaches accordingly.
- All three processes should be aligned with the organization’s mission, vision, and objectives.
- Foresight helps in understanding how these might evolve in the future. Strategic planning sets the course to achieve them, and ERM ensures that risks are managed in a way that supports the achievement of objectives.
In summary, Foresight, Risk Management and Strategic Planning are interconnected and complementary processes that work together to help organizations navigate an uncertain future, set a clear direction, and manage risks effectively. An integrated approach ensures that an organization is both proactive in its strategy and responsive to emerging challenges.
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Space intentionally left for the future.