Scenario planning as an element of strategic risk management

Enterprise Risk Management of a company is a founding element of the strategic planning processes and must be applied to the determinants of the choices of the strategy itself and to the consistency matrix of the organization’s mission, vision and values. This becomes always more essential in a generalized context in which the contraction of the duration of life cycles of business models, determined by destructive exogenous factors, originated by the development of technology, often leads to a scenario in which the life cycle of investments based on a certain strategy is longer than that of the underlying business model.

Enterprise Risk Management is also a managerial lever for creating value. The attitude to a risk based approach is usually due to regulatory or soft law prescriptions while it would be better considered as a third dimension, other than “what” and “how”, of the paradigms and management schemes. A well working risk management process could also help to avoid the cognitive distortions produced by the limited rationality of human beings, which can lead to destruction of value. In this paper, the concepts above will be discussed in a theoretical way and in the context of a multiutility business like Iren.