Strategic Expenditures (StratEx)

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Strategic Expenditures (StratEx)
John Gross
A useful recommendation by Robert Kaplan and David Norton is to create a new expenditure category to protect strategic investment projects and assets from slash-and-burn cost cutting exercises during the economic downturn: "Strategic Expenditures" or "StratEx". In this way, long-term strategic initiatives or programs can be protected when operational inefficiencies have to be rooted out.
Source: HBR December 2008, p.28

Strategic Risk Management
Quite informal.

David G Wilson
In the modern world of economic downturn and business speak such a simple (dare I say common sense!?) solution could be a means of managing that particular and very real risk.

StratEx Additional Expenditure Category
Thank you John for sharing this indeed practical tip from Kaplan and Norton. This idea will be useful for current as well as future cost cutting periods.

Limitation of Strategic Risk Management
Sekar Vedaraman
We can avoid, control, mitigate, eliminate, or overcome the risks which we can foresee. But when an unforeseen "Black Swan event causes disruption then the so called "strategic expenditures" - expenditure category may have no meaning and may need to be relooked at in light of the new information.
Game Theory and Risk Intelligence may help to obtain a better understanding of how to manage what we do not know and cannot guess till the event occurs. If we could anticipate the unanticipatable then strategic risk management would really play a role in the survival of organizations in turbulent times.
Can we identify the low probability -very high impact risk items (which are generally ignored in a normal risk assessment exercise as highly unlikely) and focus on what-if scenarios to manage such risks?


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