Strategic Risk / Uncertainty

Risk is defined as the assessment of the severity, amount and nature of losses which an action may incur

Uncertainty is the limits and precision and the extent of knowledge about an event or subject

Categories of Risk
Strategy	Changing Patterns of Demand	Exogenous
Operations	Manufacturing/Process Systems	Exogenous
Economics	Changes in Interest Rates	Exogenous
Hazards	Natural Disasters	Exogenous

E.g. Bhopal was an eg of man made risk of not adopting to new technologies (Endogenous)

Organizational/Managerial Risk
Organizational Risk Factors						Complex/Simple Environments	The More Complex the More Risk
Scarcity/Munificence	Abundance provides a context where greater risk can be taken
Managerial Risk Factors						Aspirations/Expectations	Higher expectations mean better performance is more likely and less risk
Economics	Changes in Interest Rates	Top-Team Characteristics	Higher levels of heterogenity is likely to promote risk
Ownership	Managers who do not have equity stake are less likely to take risks

• Managerial Risk is where managers make choices associated with uncertain outcomes
• Organizational Risk is where orgs face volitile income streams associated with turbulent environments

Org Risk factors Complex/Simple Environments............................The more complex the more risk Scarcity/Munificence...........................................Abundance provides a context where greater risk can be taken

Managerial Risk factors Aspirations/Expectations.....................................Higher expectations mean better performance is more likely and less risk Top-Team Characteristics...................................Higher levels of heterogenity is likely to promote risk Ownership.........................................................Managers who do not have equity stake are less likely to take risks

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