As Board directors responsible for setting the ultimate direction for your organisation – why is it critical you stress test the assumptions your strategy is based on?  

What has created a great deal of volatility, complexity, ambiguity & uncertainty have been threats outside of our control and a pace of change that is breathtaking.

In its simplest form, particularly for NFP organisations, strategy setting is your board and management having regard for the current state of your organisation, its strengths to be leveraged, the weaknesses with the potential to undermine your organisation, including opportunities aligned with the vision that warrant further exploration to strengthen your organization’s value proposition.   

What has created a great deal of volatility, complexity, ambiguity & uncertainty have been the threats – those external factors that have the potential to devastate your business, and the pace at which the impact of these threats reverberates globally, nationally, and locally is significant.  

If we look at best practice, we can see that board directors are responsible for setting the “strategic intent” , the ultimate direction for their organisation, aligned with the organisation’s vision. Their responsibility also lies in reviewing, assessing, understanding, and approving the strategic plan developed by management to deliver upon the strategic intent.  

In their role in strategic planning, board directors need to be able to assess and understand the issues, opportunities, and risks that drive performance in the current market. The board is also responsible for monitoring the execution of the strategic plan with an eye to stress testing assumptions along the way together with management.

Generally, assumptions are made about the environment in which the sector operates, and some threats are clearly on the horizon or visible to your organisation.  These are those threats you are aware of and need to prepare for, such as ongoing regulatory changes, compliance, impending royal commissions, and the potential findings, while there are other threats which blindside such as the pandemic, and the disruption and challenges on people’s lives and organisations.

Stress testing your strategy to better enable the business to survive and thrive as it navigates through the Covid-19 pandemic is the first of those external threats most organisations have or are grappling with. Such as:

  • What will the organisation look like?
  • What skills are required to make sense of the uncertainty?
  • Create vision and provide clarity through the volatility.
  • How do we continue to deliver services to our clients, particularly the vulnerable, while accommodating restrictions?
  • How do we manage the impact to the supply chain?

And one of the most pressing issues across all industries is how do we attract, recruit and retain our workforce in a market where there is enormous competition for a dwindling pool of candidates.

Pace of change is breathtaking and just as we begin, with a sigh of relief, to feel we can move on and live with Covid-19 in our community, the IMF’s (International Monetary Fund) World’s Economic Outlook July 2022 findings describe the global economy as “gloomy and more uncertain”.  The convergence of these gloomy developments in 2022 with a world economy which has already been weakened by the pandemic creates risks that our organisations are not immune to.

Threats associated with tighter financial conditions, inflation, industrial relations, escalating cost of goods, increase in interest rates, reflecting Covid-19 outbreaks and lockdowns. 

So, as organisations embark upon their strategy setting, typically on the Board’s agenda over the next quarter or so, take time to peel it back and reflect on the core purpose of the organisation and its vision – is it still reflective of your strategic intent?

Now is the time to stress test your strategy against the assumptions upon which the Board set its course.

To learn more about Stress Testing Strategy, visit VUCA Director Learning – The Board’s role in Strategy (module 5). 

Are you a client of CBB? You are invited to join CBB and VUCA Trusted Advisors for an interactive online webinar this October 10th 2022 to further explore the topic of stress testing your organisation’s strategy. Click here for more information and to RSVP.