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In the past a strong brand, a product or service portfolio that was aligned to customers’ needs alongside effective marketing communications, was enough in itself to separate your offer from those of your competitors. Not any more!

In their recent Future of Risk study, Ernst & Young discovered that senior managers were now acknowledging that risk management was equally important in enabling performance and generating long-term value.

The focus amongst senior managers seems to be shifting away from a short-term outlook, where the aim is simply to protect existing assets, towards aligning risk management with all other parts of the business in order to create an interconnected platform for sustainable growth.

It is clear that there is some correlation between risk management and marketing. By improving risk management and linking it to business objectives, marketing professionals can develop more complex and realistic scenario planning when creating their marketing strategy.

Furthermore, they can then align these risks with forecast market trends to feed information back into the risk management function to improve the process on that side of the business. And, of course, a failure to consider risk could now mean a career-terminating reputational crisis on a potentially devastating scale.

But can better alignment between risk and opportunity, with more rigorous risk management initiatives embedded, be enough to create competitive advantage in today’s economy?  There is, of course, always a need for marketing to communicate with stakeholders, build brands and introduce corporate values to a target audience. You cannot allow risk aversion to hobble marketing or a business would ultimately collapse.

Being aware of the risks, as well as the strengths and weaknesses of the company and the wants of the market, managers can develop innovative strategies that will allow them to transform these risks into opportunities to leapfrog rivals.

Mobile telecoms rivals Orange and T-Mobile have this week announced a joint venture that will see them take the majority share in the mobile phone operator market. This will allow them to share infrastructure and back-office functions.

The two businesses are expected to remain separate and retain their brands, but the operating costs for the two companies will be lower. This will allow them to be more competitive in a price sensitive market.

Similarly, earlier this year, Microsoft, who had lost out to Sony’s PS3 in the battle to provide the ultimate high definition platform, announced that, through a strategic partnership with Sky, owners of their Xbox 360 consoles would be able to stream live news and sport through their consoles, as well as, potentially, download music, films and documentaries on demand.

While other consoles offer a similar service, they are restricted to ‘on demand’ media. Microsoft will be the first to offer live news and sport through their platform.

In both of these cases, strategic partnerships to mitigate risk appear to be undertaken alongside the maintenance of separate core brands. In the mobile case, the instinct for one brand to seek to overwhelm another through an all-or-nothing local merger appears to have been resisted, although we must await further announcements.

In these difficult times, the interconnection between marketing and risk management is becoming ever more important as the stakes rise over error or over-extension.

Perhaps the recent economic crisis has placed a new premium on efficient management to increase sales and control cash-flow in tandem, so that the sales process (which is ultimately what marketing is geared towards) becomes better aligned with risk mitigation (a central element in financial survival). 

The historic tension between an entrepreneurial culture of risk-taking and flair and a financial management culture of risk aversion and conservatism may be reducing.

This could mean a new hybrid corporate culture where, as a result of the need to manage regulation and compliance, as well as reputation and communications, accountants and marketeers are no longer natural enemies. 

Companies that can mitigate risk effectively can then turn these risks into opportunities and build brands with new and unique offerings that will be able to leverage the art of risk management to gain fresh competitive advantage.

[Expression of Interest: Ernst & Young Global are a longstanding client of Pendry White although the opinions in this posting are entirely those of Pendry White. For further information, contact Roger White through Whiteboard]