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hoW Can The monITorIng and ConTrol proCess aTTempT To ConTrol rIsKs? 351

how can the monitoring and control process attempt to control
risks?
A key duty for any manager tasked with implementing an operations strategy is to think
through the potential risks that might throw the implementation off track. The basic
motivation for including consideration of risk in the monitoring and control phase of
the operations strategy process is simply to ‘be prepared’ for the events that could cause
implementation to deviate from its intended course. Of course, risk is an ongoing issue
for all firms; this is why they have internal audit experts and departments. Internal
auditing is supposed to be an independent, objective assurance activity that is designed
to add value and improve an organisation’s operations by bringing a systematic and dis-
6
ciplined approach to evaluating and improving the effectiveness of risk management.
Risk management is a huge topic in its own right, and one that is largely outside the
scope of this book. But it is important to think in terms of how the practical issues of
strategy implementation can incorporate some consideration of risk. Here we will look
at six aspects of risk that are particularly relevant to operations strategy:

1 The dynamics of monitoring and control
2 The risk of market and operations performance becoming out of balance
3 The distinction between pure and speculative risk
4 Controlling risk through prevention, mitigation and recovery
5 Adjustment cost risk
6 Intervention risk

The dynamics of monitoring and control

As implementation proceeds and monitoring indicates its progress, the trajectory of
the implementation may have to be changed. Competitive activity or more general
environmental change could affect the level of performance required, as in the Red
Queen effect previously described, or the change may need to be more fundamental
with changes in the direction of strategy as well as extent. How easy an operation finds
a change of direction will depend on its agility, which, in turn, will depend partly on
how tightly its operations resources are aligned with its market requirements.

Tight alignment and loose alignment
In the diagrammatic representation of alignment, explained previously in Figures 9.2
and 9.6, we represented alignment as being a single point between market requirements
and operations resource capability. The implication of this is that there is a single,
‘tight’ and well-defined statement of market requirements, together with a relatively
narrow set of operations capabilities that correspond exactly with market requirements.
Remember, though, that both market requirements and operations resource capabili-
ties can change over time. Markets are dynamic and exhibit sometimes unexpected
changes. Operations resource capabilities may change at a slower pace but are still sub-
ject to sometimes unexpected movements. Therefore, on our diagrammatic represen-
tation, the origin of the requirements and resources diagram can shift over time. This

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