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354 The proCess oF operaTIons sTraTegy – monITorIng and ConTrol

Figure 10.8 pure risk has only negative consequences (a to C). speculative risk can
have both positive (a to b) and negative (a to d or a to e) consequences

D Line of fit
Level/nature of market requirements B E

C
A
Speculative risk can
have both positive
and negative
Pure risk has consequences
only negative
consequences

Level/nature of operations resource capability

Controlling risk

Operations strategy practitioners are understandably interested in how an operation
can avoid failure in the first place or, if it does happen, how they can survive any adverse
conditions that might follow. In other words, how they can control risk. A simple struc-
ture for describing generic mechanisms for controlling risk uses three approaches:
1 Prevention strategies – are where an operation seeks to completely prevent (or reduce
the frequency of) an event occurring.
2 Mitigating strategies – are where an operation seeks to isolate an event from any pos-
sible negative consequences.
3 Recovery strategies – are where an operation analyses and accepts the consequences
from an event but undertakes to minimise or alleviate or compensate for them.

Prevention strategies
It is almost always better to avoid negative consequences than have to recover from
them. The classic approach is to audit plans to try and identify causes of risk. For
instance, by emphasising its use of ‘fair trading’ principles, the high-street retailer The
Body Shop was able to develop its ‘ethical’ brand identity as a powerful advantage,
but it also became a potential source of vulnerability. When a journalist accused one
of the firm’s suppliers of using animal-product testing, the rest of the media eagerly
took up the story. To prevent this kind of accusation from resurfacing, the firm intro-
duced a detailed auditing method to prevent any suspicion of unethical behaviour in
its entire supply chain.

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