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Risk management is outgrowing its origins as a tactical, operational discipline and becoming more tightly embedded with the strategy-setting process.

At a majority of firms in a recent Economist Intelligence Unit survey, the risk function now plays a formal role in strategy-setting and in evaluating new market investments. Most risk managers in the survey also say their organisation is effective at linking risk management with strategy.

There is a long way to go, however, before senior management fully take on board the analysis of long-term risks when charting the organisation's long-term strategy. Scenario planning, for example, is used widely in long-term risk analysis, but at few companies (no more than 20% in the survey) do such risk scenarios figure in long-term strategic planning. And risks tend to be considered over a shorter period of time than strategic objectives—a clear indication of misalignment.

"The Long View: Getting New Perspective on Strategic Risk," report is based on a global survey of nearly 500 executives, all with direct responsibility or influence over their firm’s risk management.

At the most senior level of the organisation, discussions about long-term prospects and risks are becoming more frequent. Over one-third of respondents say that their board and senior management have increased the time they allocate to discussing long-term risk analysis.

The study also finds that while a large majority of companies are using scenario planning to identify and assess long-term risks, but few are embedding it into overall strategic-decision making. More than one-half of respondents agree that they should spend more time thinking about the risks they will face ten years from now.

Some companies are making long-term strategic plans without a proper consideration of the associated risks. For 58% of respondents, strategic objectives are considered over a period longer than three years, but only 44% report considering risks over more than three years.

Respondents report that senior management’s disproportionate attention to immediate risks is the biggest barrier to companies taking a longer-term view of their risk exposure. Boards and senior management must move beyond this myopia so that immediate priorities do not over-shadow longer-term strategic planning and risk management.

“Business leaders need to be looking at the future from a different perspective – one that is informed by the current climate of uncertainty but also by accepting that, though the future is largely unpredictable, being prepared for at least some of the outcomes will always pay off," says Iain Scott, the editor of the report.

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