Strategic Risk

H ow can executives ensure that their shareholder value will continue to grow rather than stagnate or even collapse? Pattern thinking, which assists in endeavors from medicine to chess, can be harnessed to offset this major business risk.

The primary task of senior executives seeking sustained value growth can be succinctly described as the management of risk for the benefit of shareholders. Risk is an essential element of any strategy; take on too little or too much and the returns are not there. The business lexicon is filled with terms that reinforce this connection, such as "bet the company," "risk/reward tradeoff," and "calculated risk."

Entire industries, representing much of what we know as the insurance, financial services, and operations co...