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It has been estimated that half of today’s Fortune 500 Companies will not be in the Fortune 500 just ten years from now. Whereas the average time that Fortune 500 companies remained in the Fortune 500 in 1965 was 33 years, it is projected to be down to 14 years by 2026.
Here is a challenge to ponder: can your enterprise develop a strategic planning process that will increase your chances to succeed and thrive given market turmoil, economic uncertainty, AI and creative forces that may not be known to you until your mission has been disrupted? Very few took Elon Musk seriously, as we know from Isaacson’s brilliant biography. Walt Disney was nearly bankrupted because he had underestimated the budget demands of building Disneyland in Anaheim, CA. Warren Buffet, early in his career, was told that Omaha could never be home base to a thriving global investment platform.
Sustainability requires capital, savvy decision making, ethical choices and yes, intuition. At Insurex, we relish unlocking these qualities for clients.
Adherence to a disciplined approach in formulating corporate strategy and engaging in a continuous review of that strategy increases the probability of sustained success. While some roadmaps seem fundamental, many elude business leaders. We find that these four are integral, and must be viewed and acted upon together:
SWOT Analysis
KPIs
Enterprise Risk Management
Exposed Nerve
SWOT Analysis - While the origin of SWOT Analysis goes back over 50 years with its roots traced back to the Stanford Research Institute, it remains a useful tool in formulating strategy especially in enrolling key stakeholders that include employees, management, company leadership, and corporate boards. Against the industry background of identifying environmental risks and opportunities that face organizations and the particular strengths and weaknesses of the company, a SWOT analysis attempts to frame winning strategies. It is better to make the list of environmental challenges and opportunities along with the company’s strengths and weaknesses larger rather than smaller. The repeated use of the tool on a periodic basis educates stakeholders, identifies when change in direction is needed, and increases the organization’s speed to action.
Exposed Nerve - Usage of the term “exposed nerve” in highlighting what can bring severe pain and sensitivity to a business, helps prioritize what truly matters and must not be overlooked. Identifying a company’s “exposed nerve” in combination with completing a SWOT analysis helps bring focus to fundamentals of a company that cannot be overlooked.
KPIs - Once strategies have been identified, it is critical that a company can agree upon key performance indicators that provides a quick assessment as to how the company is performing in executing its key strategies. KPIs may be chosen to measure progress that is being made with specific strategies or in terms of critical corporate-wide goals such as revenue, profit, expense management, etc. KPIs are chosen that are easily measured and can be published on a reasonably frequent basis. Ideally, the number of KPI’s should be relatively small.
Enterprise Risk Management (ERM) - A ERM process consists of first identifying risks facing an organization. For each risk, a regimen should be followed that describes the risk, quantifies the exposure, qualifies the risk as to probability of occurrence, outlines mitigation strategies and identifies the owner of risk within the organization. Based on the probability of occurrence of the risk and potential magnitude, the list of risks should be ranked as a priority and reviewed on a regular basis. A tip that I found useful is to make the list larger than smaller. Often, the risk that ultimately looms large is not at the top of the original list!
In many companies there is a propensity to make the CFO the owner of all risks. The owner of a risk should be the individual who has primary oversight over mitigating the risk. An active, engaged leadership team being actively involved in the ERM process will also pay dividends in knowing when to make changes in the company’s main strategies. A robust review of the ERM process annually will make the SWOT analysis more comprehensive. While transferring risk to an insurer makes sense, and even a modest degree of self-insurance may be appropriate, the process of risk assessment is essential before an enterprise pursues risk mitigation.
Having a Board aligned with executive leadership on these issues is essential. In fact, think about serving on the Board of the many well-regarded Fortune 500 companies that are today under the microscope for allegedly not anticipating risk: the list includes colleges and universities, aeronautics and technology companies, financial service firms including banks, and even federal protective agencies.
Managing a crisis before it manages you begins with thinking about sustainability through the storms.
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