A strategic plan is an executive roadmap used to succeed and drive organizations; a high-level strategic plan that intention is to reach one or more goals under different scenarios and uncertain conditions.

1. By Kjell Sudenius, 15 October 2017
A View of Corporate Strategy and Risks
A strategic plan is an executive roadmap used to succeed and drive organizations; a high-level
strategic plan that intention is to reach one or more goals under different scenarios and
uncertain conditions. It’s a structured plan for its overall scope and direction of an organization
and the path its various business operations, i.e. business units, affiliates, etc. work together to
achieve particular goals. Strategy becomes even more critical during volatile situations where
one comes to a stage when there are insufficient strategic resources to achieve these objectives.
Likewise, a strategy is about developing and maintain a strong position or create an advantage,
and the exploitation of opportunities rather than committing to an “as is” plan (Lavinsky, 2013).
Strategies and Risks Management
Global organizations are typically organized into multiple “strategic business units (SBU)” or
affiliates working across the globe where their mission is to provide products and services to
identifiable clients (Williamson et al., 2004). With this comes many risk factors, that must be
analyzed and identified before starting the process of formulating and implementation of an
aligned strategy (Williamson et al., 2004; Frigo and Anderson, 2009).
Kaplan and Mikes (2012) argued that when creating an efficient and effective risk-management
system, it is imperative to understand the qualitative characteristics of those risks that an
organization are facing. Research shows that risks can be categorized into three different topics
that can be fatal to organizations strategic direction and its survival and these are in short:
1. Preventable Risks – that is inherent risks that can be caused by its own organization
that is controllable and must be eliminated or avoided merely.

2. 2. Strategy Risks – these cannot be managed through rule-based control modeling. One
must develop a risk management designed to reducing risk probabilities assuming risks
actually materialize and improves organizations ability to manage or contain those risk
events if they occur. Meaning a strategy that has high expected returns will generally
require a company to take significant risks, and those risks are their key drivers in
capturing potential gains on returns.
3. External Risks – those risks can arise from events outside organizations reach and hard
to influence or control. Sources from such risks can include natural and political
disasters or from significant macroeconomic shifts. Those risks require a different
approach because organizations cannot prevent such events. Therefore, management
must focus on identification of these risks and try to mitigate their impact.
Moreover, risks have a significant impact on corporate performances and its ability to execute
its strategy and achieve its objectives. Such focus tends to reinforce the relationship between
organizational strategies, execution, and risk management processes embedded and owned by
the senior management that must support corporate culture, and those risks factors are
identified within a clear framework as depicted in fig 1:
Fig. 1: Strategic Risk Management Framework
Source: Frigo and Anderson (2009)
Management must carefully analyze where the organization is, where they want to go, what
options do they have to reach their objectives in a best possible way, and more so, management
must understand their organization and its businesses to maximise overall synergies
(Williamson et al., 2004).
There are of course many tools available, but one that is often used by management is
“Strength, Weaknesses, Opportunities, and Threat (SWOT)” analysis. This tool, if used
correctly will determine organizational opportunities to pursue goals and identify strength,

3. discover its weaknesses and disclose threats (i.e. market shifts, resources, competitions, etc.)
and is a tool for management that can be used to develop and improve corporate performances
through a determined strategic objective (Lavinsky, 2013).
The “FIRM (i.e. fit, impact, and resources, managed)” is an excellent evaluation tool used to
analyze the “optimal way” ahead for each SBU’s. Corporations as a whole must be weighted
over both short- and long-term associated with shareholders value and companies funding that
can predict financial predictions for different scenarios. Accordingly, the analysis should have
estimates that can predict the company’s worth and how new strategy influences its
stakeholders (Williamson et al., 2004).
In contrast, commonly strategic tools for management that are measuring its organizations is,
of course, the “Balanced Scorecard” tool. This tool defines “performances and measures” that
will support and guide management enroute to achieve its desired goals through organization's
mission and vision translated into performance measures that are quantifiable and appraised.
Such Balanced Scorecard would typically measure:
• Corporate financial performances (e.g. revenues, return on capital, earnings, cash
flows)
• Client value performance (e.g. clients satisfaction, market share, client loyalty)
• Corporate internal business performances (e.g. productivity rates, timelines, and
quality measures)
• Performances in innovation (e.g. percent of corporate revenue from new products,
rate of improvement index)
• Employees performances (e.g. knowledge, morale, turnover rate, best practices
Moreover, a Balanced Scorecard will support management in articulating their vision and
strategy and assist them in identifying the performance categories that best achieve or link their
vision and strategy to its results such as financial performances, operations, its innovation
capabilities and the performances of their employees. Such tool will further support the
management to develop effective and efficient measures according to meaningful standards for
short-term goals or milestones and set long-term targets translated from established objectives
promoting their vision and strategic directions. Also, the BSC will also create working
company standards ensuring acceptable methods of measuring performances. Likewise, it
creates proper budgeting, tracking, communication and a rewards systems set in a corporate
process where one can make adjustments through controlled actions to close unfavorable or
unforeseen gaps within these processes (Kaplan and Norton, 2006).
More personal experience with Balanced Scorecards are many, and some of the lead bullet
points can be summarized as follows:
• Clarifying business strategies across the organization
• Connecting strategic objectives with company long-term target and budgets
• Monitoring and tracking key drivers in our business strategy
• Incorporate our strategic goals into “resource allocation processes.”
• Facilitating business and organizational changes

4. • Measuring and comparing the effectiveness of geographically diverse business units
• Aiming to increase company-wide awareness of corporate vision and strategy
The Energy Market and its External Risks Forces
The energy business is faced with uncertainties like geopolitics, climate change, operational
risks, available resources and innovations through organizations and technological quality
deliveries of products and services and more so political influence can have a high impact on
corporations as a whole forcing them to “reshape” their strategic directions (Alizadeh et al.,
2016).
Germany is one example in the aftermath of the Fukushima disaster in 2011 where they decided
to “abandon” their “nuclear power” generation as part of the “Energiwerde” decision by its
government in 2010. This decision had a huge impact on their power utilization and supply
chain, forcing a complete change in their strategic direction, replacing nuclear energy to meet
future demand (Alizadeh et al., 2016). Also “force majeure” situations, i.e. hurricanes, wildfire,
earthquakes, tsunamis, hurricanes, terrorists, and wars could have a tremendous impact on
external risks to energy organizations.
However, a useful tool used to analyze external forces is the “political, economic, social, and
technological analysis tool (PEST)” used in the analysis of the business environment related to
one's situations in those countries one is operating (Makos, 2014).
Internal Resource Capabilities
The overall corporate strategy also includes internal resources available to execute and achieve
the goals in a strategic plan. Lack of sufficient strategic resources and with an organizational
structure not aligned makes it almost impossible for management to deliver its strategic plan
(Lavinsky, 2013). Focusing on available resources to execute the plan includes the overall
supply chain of the corporation. Barriers to achieving their strategic goals could also be lack
of management initiation in executing the plan. One has experienced several “nice to have”
plans due to lack of stakeholder involvement and management without knowledge of how to
implement and execute them.
Drivers of Competition and Global Expected Preferences by Consumers and Issues
Energy organizations face competition in all phases of its businesses, and it is crucial they
perform both quantitative and qualitative analysis and are using financial and non-financial
performance indicators and metrics to measure its corporate performances to the benefits for
its shareholders and its consumers. Therefore, SWOT and PEST analysis can monitor
organizations competitive landscape and its resources available in an optimal way (Williamson
et al., 2004).
Several other factors that have an impact on drivers in the competitive landscape is from fossil
fuels with its volatility. That has an enormous impact on the energy mix and its sources such
as natural gas, petroleum, and coal used for generating electricity or in other words, “the
elasticity of substitution among fuels” (EIA, 2012).

5. An analysis performed by Accenture (2010, p. 3) shows “significant contradiction between
consumer perceptions and their actual knowledge of energy efficiency.” That means users
around the world do not adequately balance the electricity usage and environmental impact.
The report revealed that 59% of consumers in Europe knew that energy power is damaging to
the environment as opposed to Asia and South America, only 27% was aware of such impact.
That shows in my view, the importance of educating consumers on their use of electricity.
Otherwise, one will end up being careless about the environment and only care about the price
that has an impact on preferences.
Accordingly, corporate governance that defines clear paths in its ability to develop a strategic
direction, including risk management processes, the way it is analyzed, monitored and managed
is essential in creating a successful corporate strategy (Frigo and Anderson, 2009). Thus,
having a holistic view on its overall strategic approach broken down into single SBU’s through
analyses of its position in its market vertical to maximise profit and return on investment to its
shareholders (Williamson et al., 2004).
References:
Accenture. (2010) ‘Understanding Consumer Preferences in Energy Efficiency,’ High-
Performance Delivered, pp. 1 – 36 [Online]. Available from:
https://www.accenture.com/t20151127T210510__w__/us-
en/_acnmedia/Accenture/Conversion-
Assets/DotCom/Documents/Global/PDF/Industries_9/Accenture-Understanding-Consumer-
Preferences-Energy-Efficiency-10-0229-Mar-11.pdf (Accessed: 7 May 2016).
Alizadeh, R., Lund, P., D., Beynaghi, A., Abolghasemi, M., & Maknoon, R. (2016) An
integrated scenario-based robust planning approach for foresight and
strategic management with application to energy industry, Technological Forecasting &
Social Change, Vol.104, pp. 162 – 171.
EIA. (2012) ‘Competition among fuels for power generation driven by changes in fuel
prices,’ [Online]. Available from: http://www.eia.gov/todayinenergy/detail.cfm?id=7090
(Accessed: 6 May 2016).
EIA. (2013). ‘Annual Energy Outlook,’ [Online]. Available from:
http://www.eia.gov/forecasts/aeo/pdf/0383(2013).pdf (Accessed: 6 May 2016).
Frigo, M., L., & Anderson, R., J. (2009) Strategic Risk Assessment; A first step for
improving risk management and governance’ [Online]. Available from:
https://www.rims.org/resources/ERM/Documents/StrategicRiskAssessment_StrategicFinance
_December2009.pdf (Accessed: 6 May 2016).
Gillingham, K., & Palmer, K. (2014) Bridging the Energy Efficiency Gap: Policy Insights
from Economic Theory and Empirical Evidence, Review of Environmental Economics and
Policy, Vol. 8, Issue 1, pp. 18 – 38.
Kaplan, Robert S., & Norton, David P. (2006) Alignment: Using the Balanced Scorecard to
Create Corporate Synergies. Harvard Business School Press

6. Kaplan, Robert S., & Mikes, A. (2012) Managing Risk: A New Framework. Harvard
Business School Press
Lavinsky, D. (2013) ‘Strategic Plan Template: What To Include In Yours,’ Forbes [Online].
Available from: http://www.forbes.com/sites/davelavinsky/2013/10/18/strategic-plan-
template-what-to-include/#57aaa01d7e2f (Accessed: 7 May 2016).
Makos, J. (2014) ‘Understanding Pest Analysis with Definitions and Examples,’
Pestleanalysis [Online]. Available from: http://pestleanalysis.com/pest-analysis/ (Accessed: 7
May 2015).
Simkins, B. & Simkins, R. (eds.) (2013) Energy finance and economics: analysis and
valuation, risk management, and the future of energy. Hoboken, NJ: Wiley.
Williamson, D., Jenkins, W., Cooke, P. & Moreton, K.M. (2004) Strategic management and
business analysis. Amsterdam: Elsevier [Online]. Available
from: http://library.liv.ac.uk.ezproxy.liv.ac.uk/record=b2598744 (Accessed: 7 May 2016).