Reducing Risk Through Strategic Flexibility and Implementation Leadership in High-Velocity Markets

Abstract

Firms operating in dynamic business environments where political instability, high level of market complexity, financial ambiguity, and risk dominate the whole market must develop special capabilities to gain competitive advantage or even survive. Among these capabilities, strategic flexibility enables firms to dynamically manage their resources for adapting to high-velocity environments and reducing risks, and it also helps firms exploit the full potential of their key resource stocks. Strategic flexibility allows firms to respond quickly to unstable environments and act promptly when it is time to halt or reverse existing resource commitments. In order to establish a flexible organization, firms scan environment thoroughly and make their investment decisions and determine their priorities according to existing situations and future environmental precautions. Strategic flexibility can play a critical role for firms to reduce the risk by offering agile and prudent solutions in volatile environments. Yet, implementation of these decisions and objectives is subject to senior management's determination. Therefore, an implementation leadership style can also be vitally important to achieve "risk reduction"-related objectives. Strategic leadership that initiates the alignment of people to strategy may enable the implementation of risk management practices in the firm. This chapter explains the effects of strategic flexibility and implementation leadership on reducing risk in high volatile markets.