How is 'strategic risk' defined?

Strategic risk is fundamentally associated with the potential for an organization to fail to achieve its strategic objectives. This type of risk arises from adverse movements in the external environment, changes in market dynamics, or internal factors that may hinder the execution of a company's strategic plan. By focusing on failing to meet strategic objectives, one can understand that strategic risk encompasses a broad spectrum of challenges that can impact long-term goals and direction.

For instance, a company might set ambitious goals to expand into new markets or introduce innovative products. If unforeseen circumstances, such as regulatory changes, shifts in consumer preferences, or competitive pressures, lead to a failure in executing these plans, the organization is exposed to strategic risk. Thus, this definition effectively captures the essence of strategic risk and its relevance in the context of long-term organizational performance and success.