Strategy Plain and Simple

Containing risk

Take calculated risks. That is quite different from being rash.

George S. Patton

There is one further use for your Suns & Clouds chart. It can highlight the scope for containing areas of risk in your strategy.

Strip out all the suns from your chart, leaving just the clouds, and superimpose four boxes, carefully located, containing the words ‘accept’, ‘reduce’, ‘transfer’ and ‘avoid’ – see the figure below.

Your four basic strategies for managing risk, then, are:

• Where at all possible, avoid the big risks – if it is an internal risk, do not do it; if it is a market risk, withdraw.
• Where it is not possible to avoid a big risk, ...