Managing strategic risk in large manufacturing firms: An exploratory investigation from Italy

In an increasingly competitive environment the collection and use of relevant information about risk have gained prominence in supporting firms strategic choices. Literature on risk management and prescriptive models have proposed that firms can mitigate strategic risk by systematically identifying and assessing potential risk sources, providing the basis for effective countermeasures. The purpose of this study is to provide some descriptive insights into the practices of large manufacturing firms, focusing on the strategic risk identification stage and the use and importance of risk assessment techniques. The study reports the results of an Italy-based survey investigation considering a sample of 61 large manufacturing firms (with a response rate of 34.1%). The respondents were mainly Chief Financial Officers (CFOs) and the number of surveyed firms reflects the exploratory nature of the study. Responses reveal that the majority of surveyed firms explicitly consider strategic risk in their risk management practices and are well aware of the importance of different risk sources (operations, asset impairment, market competition, and reputation) in the strategic risk identification stage. The results also indicate that quantitative techniques (both probabilistic and non-probabilistic) for strategic risk assessment purposes are commonly used by large firms explicitly considering strategic risk, although often in combination with qualitative assessments involving the use of risk maps. These survey results (that however need to be tested on a larger sample) suggest that what risk management literature posits about the identification and assessment of strategic risk broadly aligns with the responses of firms CFOs