External Risk

External Risk

External Risk Jonathan Poland

An external risk is a type of risk that is outside of your control and cannot be influenced or managed by you or your organization. These risks may be caused by external factors such as natural disasters, market fluctuations, or changes in government regulations. Because external risks are beyond your control, they can often be difficult to predict or mitigate. As a result, it is important for organizations to have contingency plans in place to help them respond to and manage external risks effectively.

Disaster Risk
The insurance industry defines external risk as the risk of disasters that are beyond the control of a policy holder such as earthquakes, wildfires, floods and pandemics.

Act of God
Another term for disasters of a non-human cause such as a volcanic eruption.

Force Majeure
Force majeure is a major adverse event such as a disaster. This potentially includes human caused disasters such as a war but definitions vary by jurisdiction.

Environmental Hazards
The potential for an environmental disaster such as very low air quality that threatens the health and safety of large populations.

Infrastructure Risk
The potential for major infrastructure disruptions beyond your control such as an event that causes large scale internet outages.

Political Risk
The potential for political disruptions such as a revolution, strike or protest.

Economic Risk
Large economic risks such as the potential for a recession or depression. Predictable economic risks such as exchange rate fluctuations aren’t considered external as these can be mitigated.

Project Risk
Projects often define external risks as anything beyond the capacity of the project to mitigate. For example, a merger or acquisition might derail a project but be well beyond the control of the project.

External Factors
External factors are elements outside of an organization that can impact its strategy and decision making. These factors can include competition, markets, customers, technological change, economic conditions, politics, regulations, and social and cultural change. Organizations often use frameworks like SWOT analysis to identify and categorize external factors as threats and opportunities. This can help organizations understand the impact of these external factors on their operations and make informed decisions. By considering external factors, organizations can develop strategies that anticipate and adapt to changes in their environment.

Attitudes Barriers to Entry (new competition)
Business Models Business Risks
Capital (e.g. new machines) Consumer Devices
Consumer Trends Costs
Customer Experience Customer Needs
Customer Perceptions Demand
Demographics Design Practices
Direct Competition Disasters
Distribution (e.g. ecommerce) Economic Problems
Efficiency (e.g. energy efficiency of new vehicles) Elections
Environment (e.g. air quality) Environmental Regulations
Exchange Rates Factor Markets (input supply)
Financial Conditions Fiscal Policy (government spending)
Government Policy Growth Rates (industry or economy)
Indirect Competition Information Security (threats and vulnerabilities)
Infrastructure Interest Rates
Interests Know-how (of competition)
Labor Regulations Lifestyles
Market Structure New Materials
Operating Models Opinions
Political Stability Practices
Price Competition Productivity Rates
Protests Psychographics
Research & Development Revenue Models
Social Structure Strike Actions
Styles Subcultures
Subsidies Supply Chain Disruptions
Taxes Technology Culture
Technology Platforms Trade Barriers
Trade Wars Values
Examples of Competency Jonathan Poland

Examples of Competency

Competencies are the various traits and capabilities that enable an individual or organization to be effective and successful. These may…

Market Fit Jonathan Poland

Market Fit

Market fit refers to the extent to which a product or service meets the needs and preferences of a target…

Risks of Artificial Intelligence Jonathan Poland

Risks of Artificial Intelligence

Artificial intelligence (AI) has often been depicted in science fiction as a potential threat to human life or well-being. In…

Crypto Jonathan Poland

Crypto

There are these new things in the world called crypto-currencies. You’ve definitely heard about them by now. The most famous…

Variable Pricing Jonathan Poland

Variable Pricing

Variable pricing is a pricing strategy in which prices are set based on real-time data and can vary depending on…

Trademarks Jonathan Poland

Trademarks

Trademarks are used to identify and distinguish goods and services from those of others in the marketplace. Here’s what can…

Market Development Jonathan Poland

Market Development

Market development is the process of entering new markets to expand revenue and reduce concentration risk. It involves identifying and…

Supply Risk Jonathan Poland

Supply Risk

Supply risk refers to the likelihood that a disruption in the supply of goods or services will negatively impact a…

What are End Goals? Jonathan Poland

What are End Goals?

End-goals, also known as long-term goals or ultimate goals, are the desired outcomes or results that an organization or individual…

Learn More

The Power of Compound Interest Jonathan Poland

The Power of Compound Interest

Traditional finance will explain compound interest as the interest paid on a loan or deposit calculated based on both the…

Blockchain Jonathan Poland

Blockchain

Blockchain is a type of distributed database that allows multiple parties to store, share, and access data in a secure…

Price Economics Jonathan Poland

Price Economics

Price economics, also known as pricing strategy, is the study of how businesses determine the price of their products and…

Generic Drug Manufacturers Jonathan Poland

Generic Drug Manufacturers

The generic drug industry is a sector of the pharmaceutical industry that focuses on the development, production, and marketing of…

Revenue Operations Jonathan Poland

Revenue Operations

Revenue operations, also known as RevOps, is the practice of overseeing and optimizing an organization’s core sales processes. This includes…

Brand Values Jonathan Poland

Brand Values

Brand values are the principles and beliefs that a brand stands for and that guide its actions. They reflect the…

Administrative Skills Jonathan Poland

Administrative Skills

Administrative skills are abilities and personality traits that enable a person to be efficient and organized in a workplace setting.…

Willingness to Pay Jonathan Poland

Willingness to Pay

Willingness to pay (WTP) is a measure of how much a customer is willing to pay for a product or…

Sustainability Jonathan Poland

Sustainability

Business sustainability is the practice of conducting a business in a way that meets the needs of the present without…