Explain the steps involved in managing strategic risks which must be integrated within the strategic planning.

Managing strategic risk involves five steps which must be integrated within the strategic planning and execution process in order to be effective: Define business strategy and objectives. There are several frameworks that companies commonly use to plan out strategy, from simple SWOT analysis to the more nuanced and holistic Balanced Scorecard. The one thing that these frameworks have in common, however, is their failure to address risk. It is crucial, then, that companies take additional steps to integrate risk at the planning stage. Establish key performance indicators (KPIs) to measure results. The best KPIs offer hints as to the levers the company can pull to improve them. Thus, overall sales make a poor KPI, while sales per customer lets the company drill down for answers. Identify risks that can drive variability in performance. These are the unknowns, such as future customer demand, that will determine results. Establish key risk indicators (KRIS) and tolerance levels for critical risks. Whereas KPI's measure historical performance, KRIS are forward-looking leading indicators intended to anticipate potential roadblocks. Tolerance levels serve as triggers for action. Provide integrated reporting and monitoring. Finally, companies must monitor results and KRIS on a continuous basis in order to mitigate risks or grasp unexpected opportunities as they arise.