By Kwon Woo-chul

The global economic recession and related large-scale shock events have propelled executives globally to revisit and reevaluate how they view risks. The best way to move forward from here remains unclear for many.

What are the key decisions that affect enterprise success or failure, and who gets to make them? How must risk factors be incorporated into a strategy to make it a robust and potentially rewarding one? What are the risks that must be avoided to survive and the risks that must be taken to thrive?

Like people, companies die. In fact, a 1997 study concluded that the average life expectancy of a Fortune 500 company is fewer than 50 years and for smaller companies even less. And it’s safe to say that enterprise mortality rates have spiked in the aftermath of the global economic crisis of 2007-2009.

Enterprise leaders want to manage complexity, reduce uncertainty and prepare their companies for an unpredictable future, especially the next killer risk or the next giant opportunity. So, while the events of the recent past have made a strong case for revisiting how risk is conventionally understood and managed, the best way forward remains unclear for many, beginning with who has the authority and who is responsible.

The art of leadership and governance is fundamentally about judgment and decision-making: What are the key decisions that affect life and death, success or failure of the enterprise and who gets to make them?

One key lesson of these turbulent times is that critical risks need to be addressed by the board and leadership. Senior executives need a more systematic way to make decisions about risks and reward. Boards need to better understand what the key enterprise risks are, what types of relevant information need to come to their attention, and what constitutes their role vis-a-vis management.

Ultimately, everyone in the enterprise has a role to play, because risk-related decisions are made daily at every level of the enterprise. Although CEOs and chief risk officers make different decisions than the rank and file, it is possible and necessary that they all share an understanding of key decision-making skills, processes and tools.

Conventional risk management has focused on avoiding the risks to a business strategy, rather than understanding and managing the risks of the strategy itself. While the protection of existing assets is necessary, it is not sufficient for competitive advantage. Unfortunately, when risk is defined by an organization only as the failure to adequately protect existing assets and prevent loss (unrewarded risks), the rewards of reasoned, calculated risk-taking (rewarded risks) are often neglected at potentially high costs to the company’s future success. Avoiding the risks of non-compliance with regulations, operational failures and lack of integrity in financial reports are essential activities but are not sufficient for competitive advantage, and the practice of pure risk aversion will likely lead to extinction.

Enterprise survival is about more than just staying out of trouble; it is also about creating new and future value to ensure the highest return on investment. New business models; shifts in the competitive landscape, consumer preferences and behaviors; and new technologies all demand enterprise agility and resilience.

Surviving and thriving in the uncertainty and turbulence that has characterized the first decade of this century requires unconventional thinking and calculated risk-taking. To do this well, the enterprise needs to be viewed holistically. Between the two extremes of life and death, people and companies have choices to make and options to explore by way of adapting and possibly extending their longevity and success.

The successful enterprise incorporates risk intelligence into ways that it understands and manages the business. Risks must be taken to seize opportunities, and they must be managed, not simply avoided. They must also be analyzed for their complexity and interactivity. Anticipation and preparation are the keys to survival and success.