What is the difference between strategic planning and annual planning?
Here is my way of separating the two concepts:
Strategic Planning is when an organization’s leadership discusses and formally plans out the future of the organization. What goals do they have regarding market share, revenue, and customer satisfaction? With the speed of change over the last decade, I have read several articles that recommend companies no longer plan 5 years out. Instead, focus on 1-3 years at the most! Don’t be like one of these companies who failed or were extremely slow to identify and act on the external threats to their organization’s survival.
This article from Harvard Business Review combines the topic of the strategic plan time horizon with how strategic leaders should be both agile and consistent – an easy read and great advice for all risk professionals who wish to move up in their careers.
Annual Planning focuses more on how the organization will reach the goals leadership identifies in the Strategic Plan. Think logistics, projects, allocation of resources (people, time, and money), and timing. The Annual Plan is where “the rubber meets the road.”
With these two different activities, how can ERM be engaged and demonstrate added value?
Strategic Planning & ERM
I have written multiple times on how ERM can add value during the strategic planning process. Check out these posts:
- 3 Best Practices for Factoring Risk into your Strategic Planning Process
- The “Next Frontier” of Enterprise Risk Management – From Compliance to Strategy
- Integrating Strategic and Operational Risk Management
Overall, it is all about ensuring that the executives are making risk-informed decisions when determining those goals. Risk-informed can mean a variety of things, including:
- Making sure executives are aware of the top risks to the organization (Is it something so big it needs to be a focus in the strategic plan?)
- Ensuring goals are in alignment with the organization’s risk appetite. (Are they taking too much risk by wanting this specific goal? Are they not taking enough risk?)
That covers the big picture goals for the organization. Now what about the details?
Annual Planning & ERM
Annual Planning outlines the action steps for achieving the strategic goals. There can be several ways to develop these action steps.
One of my favorites is each business unit across the organization develops plans for how it will support the achieving of one or more goals.
After all, business units exist to do two things: perform day-to-day tasks to support the operations of the organization and execute plans specific to the Strategic Plan.
ERM can add value in several ways when it comes to annual planning:
- Ensure that the action plans do not unintentionally introduce new risk or increase existing risks to the organization
- Identify if and how specific actions are interdependent upon other actions
- Provide that unique risk-minded perspective on resources – are they being overextended?
- Identify which actions may help mitigate previously identified risk(s)
- Integrate with the Project Management area(s) of the organization
Note: check out these previous posts on integrations between ERM and projects
- 4 Ways ERM Can Add Value during the Project Lifecycle
- Taking ERM to the Next Level: Adding Value to Projects and Processes
When it comes to Annual Planning, the essential goal is for the organization to have risk-informed action plans focused on achieving the strategic goals.
ERM’s goal at all times is to help the organization take the right type and amount of risk at the right time.
How has ERM added valued to your organization’s strategic and annual planning processes?
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