Distinguish between Strategic Risks and Operational Risks
Strategic risks
These arise from the overall strategic positioning of the company in its environment. Some strategic positions give rise to greater risk exposures than others. Because strategic issues typically affect the whole of an organisation and not just one or more of its parts, strategic risks can potentially concern very high stakes – they can have very high hazards and high returns. Because of this, they are managed at board level in an organisation and form a key part of strategic management.
Operational risks
Operational risks refer to potential losses arising from the normal business operations. Accordingly, they affect the day-to-day running of operations and business systems in contrast to strategic risks that arise from the organisation’s strategic positioning. Operational risks are managed at risk management level (not necessarily board level) and can be managed and mitigated by internal control systems.
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