"A board who does not understand strategy may not appreciate the risks - And if it does not appreciate the risks, it will probably not ask the right questions to ensure that the strategy is properly executed." (Justice Owen, HIH Royal Commission, 2003)

Conversely it could also be said that a board that does not appreciate risk does not properly understand strategy.

The biggest mistake in developing a strategy is to think of it as the 'one true path' to success. In developing a strategy, assumptions and predictions are made - assumptions and predictions that may or may not be valid, and will most likely change over time.

Good strategies recognise the risks involved in relying on assumptions and predictions. They include checkpoints to ensure that the conditions are still valid before proceeding any further. Good strategies provide options for not only avoiding the potential downsides but also for taking advantage of the upsides. Just as companies that based their strategies of the continued availability of easy credit have come to grief in the Global Financial Crisis, companies whose strategies fail to incorporate the inevitable recovery will be slow to respond when it does eventually happen.

In most companies, responsibility for risk management is pushed down to the company's management. However, risk is best owned by those who are in the best position to understand and deal with it. Only a company's board is in the position to monitor and manage strategic risks and understand their impact on strategic plans.

A report by Professional Accountants in Business Committee of IFAC, Enterprise governance: Getting the balance right, identifies the lack of strategic oversight as a key weakness in corporate governance. It notes that getting a true and fair view of the strategic position of a company is challenging as it is generally not covered in legislation, standards or codes, as it is for the financial position.

Good strategic planning and risk management go hand in hand. An understanding of one requires an appreciation of the other.