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with a particular strategy. Many organisations may perform
something similar to steps 2 and 3, but Step 3 (change
management planning), is performed after the organisation
has committed itself, financially and psychologically, to
a certain path. Step 4 (end-state implementation and
operational risk management) is rarely done at all. This step,
in particular, ignores the vital intelligence that comes from
the explicit inclusion of operational staff. In this context, it is
perhaps not surprising that on many occasions, strategies
are implemented that are destined to fail.
Conclusion: the major benefits of the risk-adjusted
stakeholder value model
In summary, there are a number of major benefits of the
A ‘stakeholder’ approach is taken to allow both profit and
not-for-profit organisations to examine their major risks.
The importance of individual stakeholders will vary from
organisation to organisation, but the model seeks to identify
all key stakeholders, regardless of operating environments.
The model also helps to clarify the roles of the respective
management groups within the organisation – from board
through to operational line management.
While the model can be used as a top-down approach,
it also allows bottom-up information flows that can make
the most of all capabilities that reside throughout the
organisation. In fact, these are the feedback mechanisms
that help to ensure that each successive layer of the
organisation can bring its particular expertise and viewpoint
to bear, to create a vertical team-based approach to
strategic risk management.
Importantly, the model therefore specifically includes
people and risks residing within operational areas. While
strategy development is generally undertaken on a project
and process basis, the model can explicitly include line
managers within the current organisational structure.
‘Triple bottom line’ value-creation goals are explicitly
included within the analysis. Many stakeholders require not
just financial returns, but also that organisations concern
themselves with sustainability and corporate responsibility
goals across social and environmental domains. This
approach formally recognises the importance of
The model takes a dynamic approach. Emerging risks need
to be identified to ensure that stakeholder risk-adjusted value
goals are identified within both current and future settings.
Finally, KRI can be created (and aggregated) for each
level to complement corresponding key performance
indicators (KPI), and they can be easily incorporated within
a performance management and measurement framework.
The sequential nature of the framework helps to ensure a
methodical approach, but it also helps to define the various
layers of responsibility for risk management. These are:
the board will define risk policies based on stakeholder
the chief executive officer will create strategies within
acceptable levels of risk appetite that are defined by
the change management project staff will appropriately
analyse strategic change risk
operations line management will provide their expertise
on what will work and not work within existing
By addressing these specific responsibilities for risk
management, effective processes can be embedded
within a strategic management framework that accepts
the realities of an organisation’s structure. Each level of
management has its own responsibilities, and each has
its own expertise through which stakeholders can be
understood and risk-adjusted value delivered. These roles
need to be explicitly recognised.
About the authors
Craig Terry has held board, line management, internal
audit and consulting roles within his corporate career.
He has experience in change management roles,
working both as an internal and external consultant.
Terry is an adjunct lecturer in the Department of
Accounting and Corporate Governance at Macquarie
University and is a Fellow of the Australian Institute of
Company Directors. He can be contacted at
Ken Doughty (CISA, CRISC, CBCP, CRMA, CPRM) is an
experienced enterprise risk management professional
with one of Australia’s largest banks. He has more than
30 years’ experience gained in a number of specialist
areas. Doughty lectures part-time at Macquarie
University, and has had a large number of papers
plus a book published in the United States. He is an
internationally recognised speaker at seminars and
conferences, and has received a number of awards.
Doughty has a keen interest in education, and has
served on committees and boards for a number of
professional associations. He may be contacted at
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