How to identify business risk - A new tool for board members
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To identify business risks at a board level you need to have strong awareness of your market and business environment. This slideshow introduces a new visual method, developed at the world famous Henley Business School in the UK, for analysing your business environment. We show how you can use the new method to identify key issues that could become a risk (or opportunity) to your business. We also show you how you can use this method to communicate your findings and recommendations to your executive team and board members.
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How to identify business risk - A new tool for board members
- 1. How to identify business risk: A new tool for board members Anastassios Marneris www.PESTLEWeb.com © Anastassios Marneris, 2012
- 2. The Basis for your Enterprise Risk Analysis To perform your assessment of corporate risk you need: A strong awareness of your external business environments. A strong understanding of how external events can affect your business in the long term. A clear, logical and compelling argument that you can present to your executive team and board members. Use ‘PESTLEWeb’ to frame those issues and qualify your arguments. © Anastassios Marneris, 2012
- 3. The view shared by experts… Your business needs a ‘radar’ to scan your current environment for threats and opportunities Day, G.S. and Schoemaker, P.J.H “Peripheral Vision: Detecting the weak signals that make or break your company” Your strategic success depends on a deep understanding of future scenarios Van Der Heijden, (1996) “Scenarios: The art of Strategic Conversation” © Anastassios Marneris, 2012
- 4. The PESTLEWeb Risk Analysis Method PESTLE Issues 1. Identify macro issues: Global Business • What is changing? Environment • What are the causes/ consequences? Specific Industry Specific Business 2. Evaluate their impact: • What is important? Your Strategy • What represents an opportunity? • What represents a threat? © Anastassios Marneris, 2012
- 5. Building your first TM PESTLEWeb Model using www.PESTLEWeb.com © Anastassios Marneris, 2012
- 6. Brainstorm initial issues .. Use the editor at www.PESTLEWeb.com to brainstorm and organise your set of issues © Anastassios Marneris, 2012
- 7. Issues... Common symbols to represent issues in your business environment © Anastassios Marneris, 2012
- 8. Critically Review each Issue What is changing? What is important? More causes? More consequences? What represents a risk? What represents an opportunity? More information needed? © Anastassios Marneris, 2012
- 9. Link your Issues... Create links to show causes and consequences © Anastassios Marneris, 2012
- 10. Form Your Arguments... Predict and explain risk impacts on your business © Anastassios Marneris, 2012
- 11. Strengthen Your Analysis... Strengthen the analysis with comments, references and arguments © Anastassios Marneris, 2012
- 12. Enhance Your Analysis... Add rich supporting information to each issue about risks, confidence and time-scales etc. 2012 © Anastassios Marneris,
- 13. Tabulate Your Findings Use PESTLEWeb Editor to automatically create tables for documents © Anastassios Marneris, 2012
- 14. Extract Your Work Into Reports Use PESTLEWeb Editor to generate 'narrative' output that can be used in essays and ©reports 2012 Anastassios Marneris,
- 15. TM PESTLEWeb turns a list of unrelated facts into a: – Convincing, – Relevant, and – Well-structured .. …argument ! © Anastassios Marneris, 2012
- 16. Further Information.. Join us at www.PESTLEWeb.com Use the PESTLEWeb editor to model your business environment Read about our current research TM Learn more advanced PESTLEWeb methods © Anastassios Marneris, 2012
- 17. TM PESTLEWeb Picture your Business Environment www.PESTLEWeb.com © Anastassios Marneris, 2012
Editor's Notes
- To identify business risks at a board level you need to have strong awareness of your market and business environment. This slideshow introduces a new diagrammatic method, developed at the world famous Henley Business School in the UK, for analysing your business environment. We show how you can use the new method to identify key issues that could become a threat (or opportunity) to your business. We also show you how you can use this method to communicate your findings and recommendations to your executive team and board members.
- Research into the topics of strategy and risk management highlight the importance of building a ‘radar’ to scan your business environment for threats and opportunities, as well as using ‘scenarios’ to explore future trends and risk/growth areas. PESTLEWeb facilitates both these methodologies to protect your business against unforeseen risks.
- The task is to identify issues in your business environment and then to systematically analyse them.... They need to be organised into 'threads' or 'stories' - What things might cause this issue? - What might be the consequences? - Which things are changing? (think about dynamics) - Does this lead towards a business opportunity or threat? PESTLE stands for Political, Economic, Social, Technological, Legal and Environmental issues. This is a useful set areas that you should consider, as they could affect your business in the long term.
- The following slides provide a brief overview of the PESTLEWeb the editor at www.PESTLEWeb.com This illustrated example concerns a business that is producing 'green' technology – components for fuel-efficient vehicles in the automotive industry.
- The PESTLEWeb editor at www.PESTLEWeb.com is custom made to help you draw and then report on your PESTLEWeb models. It is easy to learn and use and has simple ‘drag and drop’ functionality. All of the symbols you need are pre-defined to enable you to draw a clear graphic for inclusion in your presentation. And, as you will see later, a built-in report writer enables an outline essay or paper to be generated automatically directly from your diagram.
- PESTLEWeb uses a common set of symbols to represent different types of issues. Each type of issue has a bright and distinctive color. Users of PESTLEWeb quickly become familiar with these colors and this enables them to read PESTLEWeb diagrams quickly and efficiently. Each of the issue boxes has just enough space for a brief description. You don't want to put too much text in each issue box, as this will over-complicate your message. Each box is intended to be a small 'atomic' fact about the business environment. Creating small 'bite-sized' chunks means that each issue can be considered in its own right – for example verifying it against reference sources.
- PESTLEWeb models are often built iteratively. That is, you first produce a rough outline model, then refine it – either alone or collaboratively. There is a systematic method for improving a PESTLEWeb model until it represents a rich and valuable resource for your business. Review the diagram and consider it as a whole: what is changing? What is important? What is a risk or an opportunity? Remember that all of this information can be added to the ‘issues details’ dialogue for each issue in your model. Then consider each issue in turn. Ask: What could cause this issue to occur? What are the consequences for each issue. This analysis help you think through the ‘logic’. It helps you identify missing issues and gives you ideas for new things to research. Importantly it helps you create a coherent ‘story’ that means sense to others looking at your PESTLEWeb diagram. People can understand and follow this story, which makes it more convincing and easier to remember and communicate.
- Another advantage of organising issues into discrete facts is that each of them can be analysed in their own right. For each issue consider: - What are the possible causes? - What are the possible consequences. This enables individual facts to be systematically formed into a 'story'. This step provides the 'logic' that makes PESTLEWeb models so effective at communicating and explaining. Joining individual facts into coherent 'threads' enables readers to 'think through' the explanation. Also, thinking logically in this way is much more likely generate a complete analysis without holes or important gaps. PESTLEWeb models are far more than raw facts. They are organised arguments that lead the reader through the message.
- But where does this analysis lead to? Whilst PESTLEWeb models can be used to make general, abstract arguments about the business environment, normally we are concerned with impacts on our business. So PESTLEWeb comes equipped with a symbol that specifically represents business impacts. These might be negative (threats) or positive (opportunities). But either way, they are important for your business! When you are trying to explain your strategy to other business leaders you need to show how it responds to threats and/or opportunities in your business environment. PESTLEWeb strengthens your argument and makes it very much more convincing.
- Another way of building an invincible case for your strategy is to support your PESTLEWeb model with comments, references and arguments. . Comment boxes can be used to add any important or relevant information. For example, in this case we have used a comment box to note a required action. References are pointers to other sources of information. You can add huge credibility to your argument by showing that it is supported by articles from journals and the business press. Argument boxes allow you to present your argument more explicitly. For example, if it is not obvious to the reader why one type of issue should lead to another then this can be explained in an 'argument' box.
- The PESTLEWeb editor at www.PESTLEWeb.com a llows you to add rich supporting information to each and every issue. For example, you can collaborate in your organisation to decide which are the most risky issues for your business. This added information provides another way to add richness and credibility to your analysis. Consider that now, rather than simply providing a list of 'random facts' you have built a model that is: - Composed of easy-to-understand issues - Linked together into a coherent, logical story - Supported by comments, references and argument - Underpinned by rich data about risks and time-scales etc. Your analysis has added real value to the process of scanning the business environment. And you have built this information in a form that is clear, convincing and easy to communicate.
- At some point you may need to write a report on your strategic risk analysis. This is where the custom-designed editor at www.PESTLEWeb.com really helps. The PESTLEWeb editor creates tabulated results at the push of a button. Report tables contain all of the information from you diagram in a format that is easy to reference. The report table can be copied to your word-processor or included in presentations.
- But even more powerfully, the PESTLEWeb editor can automatically generate the structure of a full ‘narrative’ report based on your diagram. This text report organises the analysis from your diagram into a ‘report’ or ‘essay’ style document covering all elements from the diagram. Again, this text can be copied into your word-processor to form the basis of a report, essay or strategy paper.