Tactical risk refers to the potential for losses due to changes in business conditions in real-time. Tactics differ from strategy in that they involve immediate, short-term actions taken in response to current conditions. In contrast, strategy is a long-term plan for achieving specific goals or objectives. Tactical risk is therefore associated with present threats and is focused on addressing immediate challenges rather than long-term conditions.
Tactical risk is an important consideration in risk management, as it involves addressing risks that are imminent or already occurring. This can involve developing and implementing strategies to mitigate or prevent these risks, as well as having contingency plans in place to respond to unexpected events. By effectively managing tactical risk, organizations can minimize the potential impacts of short-term disruptions and ensure that they are able to continue operating smoothly. The following are a few examples of tactical business risks.
A bank extends an unsecured line of credit to a large electronics firm based on the company’s healthy financial condition. A few months later, the electronics company suddenly issues a press release saying that they have discovered unidentified accounting irregularities that will have a material impact to its financial condition. Based on the press release, the bank identifies the credit line as a high risk account and freezes it before more withdrawals can take place.
A farmer reconsiders plans to plant her fields with corn when prices drop on the futures market.
Information Technology Risk
A bank uses a series of network routers that are identified as having a major security vulnerability. They quickly develop a plan to address the vulnerability by rerouting traffic and patching the routers.
A solar panel manufacturer receives news that their biggest competitor is ready to commercialize a new type of solar cell that has a high conversion efficiency and is inexpensive to manufacture.
An airline releases a new ad campaign with a catchy slogan. A popular internet meme suddenly appears that makes fun of the slogan and suggests that the company has poor customer service. The company quickly ends the campaign in response.
Health & Safety Risk
A company is contacted by three employees from the same office location who say that they have been diagnosed with a communicable disease. The company quickly contacts all staff who work at the location to inform them of the situation and to ask that they work from home for the rest of the week.
A concert promoter in Japan receives news that a typhoon is heading towards their outdoor summer event. The promoter decides to cancel the concert despite the high costs of refunding tickets in order to avoid legal risks associated with injuries from the typhoon.
Tactics vs Strategy
Tactics and strategy are both military terms. Military organizations primary view tactical risk as the conditions on a battlefield. An army may identify strategic risks before a battle but tactical risks can only be identified as they unfold.