How Risk Management Can Turn into Competitive Advantage: Examples and Rationale

In light of the occurrence of many disruptive events since the beginning of this millennium, we can observe a change in the way risks and uncertainties are being viewed in the business world. To put this change into perspective we compare the evolution in the companies’ perception of risk management with the evolution in how companies look at their supply chain management. The main driver behind the change in the way companies view risk management is the increased level of uncertainties. There are many evidences that suggest the current very high level of volatilities in the business world is going to get worse in years and decades to come. This trend of increasing uncertainties and the resulted risks for businesses, demand a strategic-level attention to risk management. This strategic-level attention is warranted not only by the high level of risks which threatens a business (a defensive view), but also by the fact that proper risk management capabilities can lead to competitive advantage (an offensive view). This article does not intend to focus on how proper risk management capabilities can be acquired. Rather, it tries to show how risk management capabilities, when a company managed to acquire them, could lead to competitive advantage