A comparison of models for strategic planning,risk analysis and risk management

Summary Risks, uncertainties in firms and their environment are increasingly dealt with strategic planning, risk analysis and risk management. The present state of strategic planning enables us to consider the greatest part of internal and environmental risks mainly qualitatively - due to the fact that the majority of planning models used are of a deterministic type.The application of CAPM in strategic planning could take risks into account explicitly and maximize the expected value of the firms' common stock. Linked to a corporate simulation model or a DSS it could generate a series of values for the expected rate of return, its standard deviations as well as other output variables important for the management. The difficulties of the use of CAPM are numerous but an attempt to optimize the value of the firm would be a big step in developing new powerful instruments for evaluating the economic consequences of alternative strategies. The problems of CAPM lead to the considerations of the application of stochastic programming in strategic planning. For special cases solution methods can be developed and applied. The implementation of the Decision Support System in strategic planning could help to find the best decision in an interactive way - as suggested in this paper for the case of strategic marketing planning. DSS renders the consideration of other factors relevant to strategic decisions possible; businesses need not be reduced to portfolio terms. The limitations of CAPM, stochastic programming and the difficulties of the implementations of DSS for strategic planning could be partially avoided through the concept of Risk Management. On this concept strategic planning represents only one instrument of Risk Management and is a powerful tool of risk identification. In this paper the other instruments have been shortly demonstrated for the cases of product reliability and risks in relation with foreign countries. The development of new instruments for special cases (e.g., siting problems, specific strategic decisions, etc.), the considerations of risk behavior in individual, group and inter-organizational or even international decision making are now the main topics in the urgent task of research in risk management.