Although strategic alliances are an important business trend, 60% of alliances fail. To avoid the risk of failure, organisations need to actively manage their inter-organisational risks through innovative risk management techniques and processes.
management+business Managing Inter- Organisational Risks ALTHOUGH STRATEGIC ALLIANCES ARE AN IMPORTANT BUSINESS TREND, 60% OF ALLIANCES FAIL. TO AVOID THE RISK OF FAILURE, ORGANISATIONS NEED TO ACTIVELY MANAGE THEIR INTERORGANISATIONAL RISKS THROUGH INNOVATIVE RISK MANAGEMENT TECHNIQUES AND PROCESSES. Patrick Ow O rganisations are constantly parency (openness toward partners) and Within our context, inter-organisa- forming strategic alliances high mutuality (collaboration of content) tional risk management are coordinated to achieve common objec- of the sharing organisations. activities to direct and control two or tives. Unfortunately, the Unfortunately, 60% of alliances fail1. To more organisations with regard to inter- failure rates of these alli- avoid such failures, organisations form- organisational risks. Inter-organisational ances are also high. Therefore we require ing alliances must actively manage inter- risk is defined as risk affecting two or a dynamic structure, framework and proc- organisational risks through innovative more organisations, which may impact esses to manage inter-organisational risks. risk management techniques and proc- on the service delivery of other organisa- Over the past several decades, the esses in order to achieve their common tions within the alliances thereby affect- use of inter-organisation and intra- objectives, especially from an inter-organi- ing the achievement of the alliance’s organisation alliances has emerged as an sational perspective, thus avoiding failures objectives. An example of an inter-organ- important business and strategic trend. that have impacted so many alliances. isational risk is “poor communication/ Strategic alliances have become principal At the basic level, risk management co-ordination between organisations.” components of many private and pub- are coordinated activities to direct and When two or more organisations lic-sector organisations as they try to control an organisation with regard to work together, there are some govern- achieve competitive advantage by access- risk2. Risk is defined as the “effect of ance issues to consider: ing more dynamic markets through col- uncertainty on objectives”3. When two or 1 Alliance management: Five destructive laboration, compromise and accommo- more organisations collaborate to form dation. Strategic alliance is a process an alliance, grouping or partnership, we 2 ISO Guide 73:2009 - Risk management – to create synergies to achieve common have inter-organisational risks or uncer- Vocabulary. See also ISO 31000:2009 Risk objectives by appropriating the competi- tainties (the known unknowns) that need management – principles and guidelines. tive intent (joint knowledge), high trans- to be managed adequately and effectively. 3 ISO Guide 73:2009. 40 ACCOUNTANTS TODAY | FEBRUARY 2010 MANAGING INTERORGANISATIONAL RISKS 1 2 3 4 5 The risk management framework is a set of components that provide the foun- MOU: Non- Legally bind- Legally bind- Incorporated Incorporated dations and organisational arrangements binding, in ing Partnership ing Partnership Association Company for designing, implementing, monitoring, principle com- Agreement Agreement reviewing and continually improving risk mitment to col- (legal commit- [plus] formal management throughout the organisa- laborate ment to col- governance tion5. laborate) body Individual organisations within an alliance should therefore have a reason- able level of maturity in its existing risk management framework and process in Least Formal Most Formal order to effectively manage inter-organi- Diagram 1 sational risks affecting themselves and the alliance as a whole, and to achieve Organisational Risks Alliance Risks the shared objectives. Individual organi- OVERARCHING INTERORGANISATIONAL RISK MANAGEMENT FRAMEWORK sation’s risk management framework must integrate and inter-operate with the alliance’s inter-organisational risk Inter- Risk Risk Initiating Organisations Organisational Organisation Within the Alliance management framework and process Impacting Impacting Risk Identified by One Other >TWO Escalate Inter- Develop a that is encapsulated in the alliance an Organisation Organisa- Organisa- Organisational Common Inter- Within the Risk to Organisational agreement. tion? tions? Alliance Governing Body Treatment Plan Based on the organisational level definition of risk management frame- Individual work, in
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