STR 581 Week 6 Strategic Evaluation and Risk Management Example

Watching the Plan and Its Risks: Evaluation and Risk Management for a Coffee Company's Strategy

[Student Name]

University of Phoenix

STR/581: Strategic Planning & Implementation

Week 6 Assignment

[Instructor Name]

[Date]

Cascade Bean Roasters, its plans, risks and figures are composites written for a model paper.

Over five weeks, this capstone has followed Cascade, scanned its environment, assessed its capabilities, chosen an upstream strategy, integrated social responsibility and planned implementation. A plan is only as good as leaders' ability to see whether it is working and to respond when conditions change. This final paper sets out how Cascade will evaluate its strategy and manage the risks most likely to knock it off course.

Two Kinds of Control

Simons (1995) described levers of control that managers use to implement strategy: belief systems that communicate core values, boundary systems that set limits, diagnostic control systems that monitor critical performance variables and interactive control systems through which senior managers engage with subordinates on strategic uncertainties. Cascade's balanced scorecard from Week 5 is a diagnostic system, tracking targets such as subscription growth and cafe margins. But Cascade also needs an interactive system to test whether the strategy's assumptions still hold, such as whether customers will subscribe at the expected rate or whether grocery buyers will value traceability.

Cascade's controls therefore operate at two levels. Monthly, unit leaders review scorecard measures against targets. Quarterly, the leadership team and board hold a strategy review focused on assumptions: what has been learned about customers, competitors and costs and whether any assumption has broken.

Thinking About Risk

Mikes and Kaplan (2015) argued that enterprise risk management should be tailored to the organization's context rather than applied as a uniform compliance exercise, and earlier work by Kaplan and Mikes distinguished preventable risks, strategy risks taken on deliberately for higher returns and external risks beyond the firm's control, each requiring different handling. Preventable risks call for rules and controls; strategy risks call for active monitoring and limits; external risks call for scenario planning and resilience.

The Risk Register

The leadership team identified and ranked ten risks. The most important follow.

Slow online growth (strategy risk; likelihood medium, impact high). Subscriptions are central to the economic logic. Owner: head of wholesale and online. Mitigation: test offers with loyalty members first; cap spending until acquisition cost is below $40. Trigger: if subscriptions are below $5 million at month 18, shift investment toward food service and grocery.

Coffee price spike (external; likelihood medium, impact high). Owner: sourcing director. Mitigation: contracts with price bands, six months of green coffee inventory and pricing policies that pass through part of cost increases. Trigger: futures above a set level for two months prompts price increases and a review of promotions.

Loss of key roasters or the sourcing director (preventable, partly; likelihood low to medium, impact high). Owner: chief executive. Mitigation: retention agreements, documented roast profiles and a trained deputy for each key role.

Inaccurate sourcing claim (preventable; likelihood low, impact very high). A claim of traceability that proves false would undermine the strategy. Owner: chief executive with marketing. Mitigation: annual independent audit; marketing claims approved only against audited data.

Grocery buyer retaliation (strategy risk; likelihood medium, impact medium). Large buyers may cut shelf space as Cascade refuses deep promotions. Owner: head of wholesale. Mitigation: add specialty accounts before reducing promotions with large buyers.

Cafe closures harming the brand (strategy risk; likelihood medium, impact medium). Owner: head of flagship cafes. Mitigation: keep cafes in the most visible locations; survey brand awareness twice a year. Trigger: awareness falls more than five points.

Execution overload (preventable; likelihood medium, impact medium). Too many changes at once could overwhelm managers. Owner: chief operating officer. Mitigation: staged timeline and monthly review of project load.

The most dangerous risk on the list is not a coffee shortage; it is a sourcing claim that turns out not to be true.

Risks Accepted Deliberately

Some risks are part of the strategy and will not be eliminated. Shrinking the cafe network gives up visibility; investing in online sales accepts the chance that subscriptions grow slowly. These are strategy risks, taken on for the higher returns the plan expects. The aim is to watch them closely and limit losses, not to avoid them entirely.

Scenarios

Schoemaker (1995) described scenario planning as a way to consider multiple plausible futures, built from key uncertainties, to test strategies and prepare responses. Using the two uncertainties from Week 1, coffee prices and downtown recovery, the team developed four scenarios. In the most difficult, prices stay high and downtown stays weak, margins recover more slowly, to about 6 percent, but the strategy still outperforms alternatives. In the most favorable, prices ease and downtown recovers, and Cascade could reopen one or two downtown flagships. The scenarios confirm that the strategy is robust and identify which signals to watch.

Early Warning Signals

Some measures warn of trouble before results appear. Subscription churn above 6 percent a month in the first quarter after launch would signal that the offer is not working long before revenue falls short. A drop in cupping scores on incoming coffee lots would signal sourcing problems months before customers notice. Rising turnover among roasters or cafe managers would signal execution strain. These leading indicators sit at the top of the monthly review so leaders can act early.

Learning From Results

Evaluation is also how the organization learns. After each quarter, the leadership team will write a short note on what the results suggest about the strategy's assumptions and share it with all managers. Over three years, these notes will form a record of what Cascade learned about its customers and markets, useful for the next planning cycle.

Governance

The board will receive a quarterly report with scorecard results, the top risks and their status and any triggers reached. A small risk committee made up of the chief financial officer, chief operating officer and sourcing director will review the register monthly. Any trigger reached requires a written recommendation to the chief executive within two weeks, with options and their costs.

Reflection on the Capstone

The capstone showed how analysis changes conclusions. At the start, leaders assumed cafes were Cascade's core and that growth meant more cafes. The external scan showed cafe markets crowded and downtown traffic down; the internal analysis showed that Cascade's real advantage lies upstream, in sourcing and roasting. Choosing a strategy meant accepting trade-offs, including closing cafes and living with fewer promotions in grocery stores. Integrating social responsibility revealed that the strategy's differentiator depends on keeping promises to farmers and customers. If I repeated the work, I would test subscription demand with a small paid pilot before formulating the strategy, since that assumption carries the most weight.

Conclusion

Cascade's strategy now has the means to be watched and adjusted: a scorecard for targets, quarterly reviews of assumptions, a ranked risk register with owners and triggers and scenarios that test the plan against uncertain futures. Together with the capstone's earlier work, these controls give the board a strategy it can follow, evaluate and change if the world proves different from the plan's assumptions.

References

Mikes, A., & Kaplan, R. S. (2015). When one size doesn't fit all: Evolving directions in the research and practice of enterprise risk management. Journal of Applied Corporate Finance, 27(1), 37-40. https://doi.org/10.1111/jacf.12102

Schoemaker, P. J. H. (1995). Scenario planning: A tool for strategic thinking. Sloan Management Review, 36(2), 25-40.

Simons, R. (1995). Levers of control: How managers use innovative control systems to drive strategic renewal. Harvard Business School Press.