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Managing Growth Risk: Lessons from the Current Crisis

Listed author(s):
  • Mathias Schmit
  • Lin-Sya Chao

The current financial crisis has caused multi-billion dollar losses and broken a long period of strong and steady growth in the investment management industry. Despite the importance of strategic risks, current management practices tend to cope with them poorly, particularly when facing strategic risks linked to growth. Strategic risks are those exposures that materially affect the capacity of a company to survive. By reviewing literature and exploring how the world's top 50 banks recognize strategic risks in their annual reports, this paper highlights that these risks are not adequately perceived by the financial world and draws lessons from the current situation. Furthermore, this paper suggests a clear definition of strategic risk and shows that uncontrolled growth is a major potential source of strategic risk and increases the vulnerability of an organization. Finally, this paper discusses a number of key factors that need to be taken into account to manage growth risk effectively in order to secure sustainable value growth.

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Paper provided by ULB -- Universite Libre de Bruxelles in its series Working Papers CEB with number 10-027.

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Length: 20 p.
Date of creation: 07 Apr 2010
Publication status: Published by:
Handle: RePEc:sol:wpaper:2013/57619
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