Risk in work unit business planning: Understanding ‘risk’ for business planning

In this article:
The focus of business planning is the end of the planning period.

Previous article: Risk in work unit business planning: Assumptions


The focus of business planning is the end of the planning period.

You first paint a clear picture for the close of business on the last day of the planning period. After painting the picture, you think about what will get you there, and about what will get in the way.

Your unit’s strategies and efforts will be necessary to reach the goal. They may not be sufficient. You may need the forces outside your control to work in a particular way, if the goal is to be reached. It can also happen that your carefully planned strategy comes to nothing, but the final result is pretty good anyway.

The risk part of business planning is concerned with the uncertainty of the final result, arising from all possible causes.

Risk is the effect of uncertainty on objectives (ISO Guide 73:2009). For unit business plan risk management:

  • The objectives are the outcomes expected of the unit at the end of the planning period.
  • The uncertainty arises from
    • unit decisions and implementations that may or may not succeed;
    • unpredictable events, inside and outside the unit; and
    • planning assumptions that may not be correct.
  • The effect on objectives is the way in which those uncertainties might change the final outcomes.

‘Risk’ is the total effect of the uncertainties on the outcomes. We can talk also about separate ‘risks’ as ‘the particular routes by which the outcomes might be affected by uncertainties’. ‘A risk’ is a specific path from an event or wrong assumption to the difference in the final outcome of the planning period.

That may seem like quite a range of ‘risks’ to consider, and so it is. But it also leaves out many types of ‘risk’ that might be buzzing around in your mind, or in the minds of your employers. Leaving out large categories of irrelevant risk will greatly simplify the work you do on risk in business planning.

Drill-down article:

Risk in work unit business planning: What can be left out

Routine and low-level events from which you can recover. Most disruptive events, even those experienced as ‘crises’. The potential for events that are clearly harmful, though to someone else’s outcomes rather than those of your unit. Risks subject to separate management. But first be sure of the objectives

Recommended next article:

Risk in work unit business planning: Re-generating the objectives

Understanding your objectives is the most important part of the risk management process. The objectives are the outcomes that the unit delivers for the organisation as a whole.

Previous article: Risk in work unit business planning: Assumptions

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