Risk management

F e b r u a r y 2 0 1 2 I S T R AT E G I C F I N A N C E 2 7

C OV E R S TO R Y

By Mark L. Frigo, CMA, CPA, and Hans Læssøe

How can organizations manage strategic risks in a volatile and fast-paced business environment?

Many have started focusing their enterprise risk management (ERM) programs on the critical strate-

gic risks that can make or break a company. This effort is being driven by requests from boards and

other stakeholders and by the realization that a systematic approach is needed and that it’s highly

valuable to include strategic risk management in ERM and to integrate risk management within the

fabric of an organization. Some companies are at the forefront of this evolving movement.

STRATEGIC RISK MANAGEMENT

AT THE LEGO GROUP

In this article we describe strategic risk management at

the LEGO Group, which is based on an initiative started

in late 2006 and led by Hans Læssøe, senior director of

strategic risk management at LEGO System A/S. It’s also

part of the continuing work of the Strategic Risk Manage-

ment Lab at DePaul University, which is identifying and

developing leading practices in integrating risk manage-

ment with strategy development and strategy execution.

The LEGO Group Strategy To understand strategic risk management at the LEGO

Group, you need to understand the company’s strategy.

This is consistent with the first step in developing strate-

gic risk management in an organization: to understand

the business strategy and the related risks as described in

the Strategic Risk Assessment process (see Mark L. Frigo

and Richard J. Anderson, “Strategic Risk Assessment,”

Strategic Finance, December 2009).

The LEGO Group’s mission is “Inspire and develop the

builders of tomorrow.” Its vision is “Inventing the future

of play.” To help accomplish them, the company uses a

growth strategy and an innovation strategy.

Growth Strategy: The LEGO Group has chosen a

strategy that’s based on a number of growth drivers. One

is to increase the market share in the United States. Many

Americans may think they buy a lot of LEGO products,

but they buy only about a third of what Germans buy, for

example. Thus there are potential growth opportunities

in the U.S. market.

The LEGO Group also wants to increase market share

in Eastern Europe, where the toy market is growing very

rapidly. In addition, it wants to invest in emerging mar-

kets, but cautiously. The toy industry isn’t the first one to

move in new, emerging markets, so the LEGO Group will

invest at appropriate levels and be ready for when those

markets do move. It will also expand direct-to-consumer

activities (sales through LEGO-owned retail stores),

online sales, and online activities (such as online games

for children).

Innovation Strategy: On the product side, the

LEGO Group focuses on creating innovative new products

from concepts developed under the title “Obviously

LEGO, never seen before.” The company plans to come up

with such concepts every two to three years. The latest

example is LEGO Games System, which is family board

games (a new way of playing with LEGO bricks) with a

LEGO attitude of changeability (obviously LEGO). The

company also intends to expand LEGO Education, its

division that works with schools and kindergartens. And it

will develop its digital business as the difference between

the physical world and the digital world becomes more

and more blurred and less and less relevant for children.

Now let’s look at the development of LEGO strategic

risk management.

LEGO Strategic Risk Management The LEGO Group developed risk management in four

steps, as shown in Figure 1:

Step 1. Enterprise Risk Management was tradi-

tional ERM in which financial, operational, hazard, and

other risks were later supplemented by explicit handling

of strategic risks.

Step 2. Monte Carlo Simulations were added to

understand the financial performance volatility (which

proved to be significant) and the drivers behind it to inte-

grate risk management into the budgeting and reporting

processes.

Those two steps were seen mostly as “damage control.”

To get ahead of the decision process and have risk aware-

ness impact future decisions as well, LEGO risk manage-

ment added:

Step 3. Active Risk and Opportunity Planning

(AROP), where business projects go through a systematic

risk and opportunity process as part of preparing the

business case before final decisions about the projects

have been made.

Step 4. Preparing for Uncertainty, where manage-

ment tries to ensure that long-term strategies are relevant

2 8 S T R AT E G I C F I N A N C E I F e b r u a r y 2 0 1 2

C OV E R S TO R Y

2

MONTE CARLO

SIMULATIONS

1

ENTERPRISE RISK

MANAGEMENT

3

ACTIVE RISK &

OPPORTUNITY

PLANNING (AROP)

4

PREPARING FOR

UNCERTAINTY

Figure 1: Four Elements of Risk Management at the LEGO Group

for and resilient to future changes that may very well dif-

fer from those planned for. Scenarios help them envision

a set of different yet plausible futures to test the strategy

for resilience and relevance.

These last two steps were designed to move

“upstream”—or getting involved earlier in strategy devel-

opment and the strategic planning and implementation

process.

Strategic Risk Management Lab Commentary:

This four-step approach is a good illustration of how

organizations can develop their risk management capa-

bilities and processes in incremental steps. It represents

an example of how to evolve beyond traditional ERM and

integrate risk management into the strategic decision

making of an organization. This approach positions risk

management as a value-creating element of the strategic

decision-making process and the strategy-execution

process.

In our research on high-performance companies, we’ve

found that companies like the LEGO Group achieve sus-

tainable high performance and create stakeholder value

by consistently executing the strategic activities in the

Return Driven Strategy framework (for example, the

focus on innovating its offerings toward changing cus-

tomer needs) while co-creating value through its engage-

ment platforms (the online community, including its My

LEGO Network, which engages more than 400 million

people and helps its product development process). Its

strategic risk management processes incorporate distinct

elements of co-creation by engaging its employees (inter-

nal stakeholders) throughout the strategic decision-

making, planning, and execution processes, as well as

engaging external stakeholders (suppliers, partners, cus-

tomers). The LEGO Group’s approach is a good example

of how an organization can engage stakeholders in co-

creating strategic risk-return management (see Mark L.

Frigo and Venkat Ramaswamy, “Co-Creating Strategic

Risk-Return Management,” Strategic Finance, May 2009,

and Venkat Ramaswamy and Francis Gouillart, The Power

of Co-Creation, 2010).

Step 1: Enterprise Risk Management The evolution of ERM toward strategic risk management

is represented in Figure 2. Strategic risk was missing from

the ERM portfolio until 2006.

To fix this, based on his then 25 years of LEGO experi-

ence and a request from the CFO, Hans Læssøe started

looking at strategic risk management. “I was a corporate

strategic controller who had never heard the term until

then,” he says. The company had embedded risk manage-

ment in its processes. Operational risk—minor

disruptions—was handled by planning and production.

Employee health and safety was ISO 18001 certified.

Hazards were managed through explicit insurance pro-

grams in close collaboration with the company’s partners

(insurance companies and brokers). IT security risk was

a defined functional area. Financial risk covered curren-

cies and energy hedging. And legal was actively pursuing

trademark violations as well as document and contract

management. But strategic risks weren’t handled explicit-

ly or systematically, so the CFO charged Hans with ensur-

ing they would be from then on. This became a full-time

position in 2007, and Hans added one employee in 2009

and another in 2011.

Strategic Risk Management Lab Commentary:

The 2006 situation is common. Even though strategic

risks need to be integrated with risk management, many

organizations don’t explicitly assess and manage strategic

risks within strategic decision-making processes and

strategy execution. But the LEGO Group’s approach

shows how strategic risk management can be a key to

increasing the value of ERM within an organization. It

also shows how executive leadership from the CFO played

an important role in the evolution of ERM as a valuable

management process. Finally, Hans came from the busi-

ness side and had the attributes necessary to lead the ini-

tiative: broad knowledge of the business and its core

F e b r u a r y 2 0 1 2 I S T R AT E G I C F I N A N C E 2 9

OPERATIONAL

EMPLOYEE SAFETY

LEGAL

FINANCIAL

IT SECURITY

HAZARD

Figure 2: The LEGO ERM Umbrella: Adding Strategic Risk

STRATEGIC (ADDED 2006)

ERM

strategies, strong relationships with directors and execu-

tive management, strong communication and facilitation

skills, knowledge of the organization’s risks, and broad

acceptance and credibility across the organization. (For

more, see Mark L. Frigo and Richard J. Anderson,

“Embracing ERM: Practical Approaches for Getting Start-

ed,” published by the Committee of Sponsoring Organi-

zations of the Treadway Commission (COSO) at

www.coso.org/guidance.htm, 2011, p. 4.)

Also, the risk-owner concept at LEGO provides a good

example of the importance of understanding who owns

the risks as well as defining the role of risk management

in the organization. The idea of “risk owners” was impor-

tant to ensure action and accountability. Hans’s charge

was to develop strategic risk management and make sure

the LEGO Group had processes and capabilities in place

to do this. But as senior director of strategic risk manage-

ment, Hans doesn’t own the risk. He can’t own the risk

because this essentially would mean he would own the

strategy, and each line of business owns the pertinent

strategic risks. Hans trains, leads, and supports line man-

agement to apply a systematic process to deal with risk.

This is just like budgeting functions: They don’t earn the

money or spend the money, but they support manage-

ment to deliver on the budget or compare performance

against the budget.

Step 2: Monte Carlo Simulation In 2008, Hans introduced Monte Carlo simulation to the

process. A mathematician by education (M.Sc. in engi-

neering), he started defining how Monte Carlo simula-

tion could be used in risk management. Now it’s being

used for three areas:

Budget Simulation. The business controllers are asked

for their input about volatility, which is combined with

analyses based on past performance of budget accuracy.

Management says this helps them understand the finan-

cial volatility, so it’s now part of the financial and budget

reporting. In fact, the first analyses directed top manage-

ment’s attention to a sales volatility that was known but

that proved to be much more significant than everyone

intuitively believed.

Credit Risk Portfolio. The LEGO Group uses a similar

approach to look at its credit risk portfolio so it can have

a more professional “conversation” with a credit risk

insurance partner.

Consolidation of Risk Exposure. You could multiply the

probability and impact of each risk and add the whole

thing up. But this is seen as an almost “systemic” error in

3 0 S T R AT E G I C F I N A N C E I F e b r u a r y 2 0 1 2

C OV E R S TO R Y

About the LEGO Group

Headquartered in Billund, Denmark, the

family-owned LEGO Group has approxi-

mately 10,000 employees worldwide and is

the third-largest toy manufacturer in the

world in terms of sales. Its portfolio, which

focuses on LEGO bricks, includes 25 product

lines sold in more than 130 countries. The

name of the company is an abbreviation of

the two Danish words “leg godt” that

mean “play well.” The LEGO Group began

in 1932 in Denmark, when Ole Kirk Kris-

tiansen founded a small factory for making

wooden toys. Fifteen years later, he discov-

ered that plastic was the ideal material for

toy production and bought the first injec-

tion molding machine in Denmark.

In 1949, the brick adventure started.

Over the years, the LEGO Group perfected

the brick, which is still the basis of the

entire game and building system. Though

there have been small adjustments in shape,

color, and design from time to time, today’s

LEGO bricks still fit bricks from 1958. The

2,400 different LEGO brick shapes are pro-

duced in plants in Denmark, the Czech

Republic, Hungary,

and Mexico with

the greatest of

precision and sub-

jected to con-

stant controls.

And there are

more than 900

million differ-

ent ways of

combining six

eight-stud

bricks of the

same color.

risk consolidation because it would give an average loss

over “a million years.” Risk management isn’t about aver-

ages (if it were, no one would take out an insurance pol-

icy on anything). With a Monte Carlo simulation, the

LEGO Group can “calculate” the 5% worst-case loss com-

pared to budget and use that to define risk appetite and

risk report exposure vis à vis this risk appetite, as shown

in Figure 3.

Risk Appetite: A privately held company, the LEGO

Group can’t look at stock values, so it looks at the

amount of earnings the company is likely to lose com-

pared to budget if the worst-case combined scenarios

happen. Not all risks will materialize in any one year

because some of them are mutually exclusive, but a huge

number may happen in any one year as we have seen

during the global financial crisis. Hans computes a “net

earnings at risk,” and corporate management and later

the board of directors use that net earnings at risk to

define their risk appetite. They have said that the 5%

worst-case loss may not exceed a certain percentage of the

budgeted earnings (the percentage is not 100). That

guides management toward understanding and “sizing”

the risk exposure. This process has helped the LEGO

Group take more risks and be more aggressive than it

otherwise would have dared to be and grow faster than it

otherwise could have done.

Strategic Risk Management Lab Commentary:

Risk appetite is a difficult area for organizations to

address. The approach used at the LEGO Group provides

a good example of deriving risk appetite in an actionable

and systematic way. It also shows an approach that fosters

intelligent risk taking and that avoids being too risk

averse while maintaining discipline on the amount of risk

undertaken.

What we’ve discussed so far is more or less “damage

control” because it’s about managing risks already taken

by approving strategies and initiating business projects.

Hans decided he wanted to move beyond damage control

and be more proactive so he could create real value as a

risk manager. He came up with a process he calls Active

Risk and Opportunity Planning for business projects.

Step 3: AROP: Risk Assessment of Business Projects When the LEGO organization implements business proj-

ects of a defined minimum size or level of complexity, it’s

mandatory that the business case includes an explicit def-

inition and method of handling both risks and opportu-

F e b r u a r y 2 0 1 2 I S T R AT E G I C F I N A N C E 3 1

NET “EaR”

GROSS “EaR”

EFFECT OF MITIGATION

NET

GROSS

5% OF SIMULATIONS

Figure 3: Monte Carlo Simulations and Risk Appetite at the LEGO Group

3 2 S T R AT E G I C F I N A N C E I F e b r u a r y 2 0 1 2

nities. Hans says that the LEGO Group has created a sup-

porting tool (a spreadsheet) with which to do this, and it

differs from the former approach to project risk manage-

ment in several areas:

Identification, “where we call upon more stakeholders,

look at opportunities as well as risks, and look at risks

both to the project and from the project (i.e., potential

project impact on the entire business system).”

Assessment, “where we define explicit scales and agree

what ‘high’ means to avoid different people agreeing on

an impact being high without having a shared under-

standing of the exposure.”

Handling, “where we systematically assign risk owners

to ensure action and accountability and include the use of

early-warning indicators where relevant.”

Re-assessment, “where we define the net-risk exposure

to ensure that we have an exposure we know we can

accept.”

Follow-up, “where we keep the risk portfolio of the

project updated for gate and milestone sessions.”

Reporting, “which is done automatically and fully stan-

dardized based on the data.”

Common Language and Common Framework:

The most important point is that the people who address

and work with risks get a systematic approach so they can

use the same approach from Project A to Project B. The

one element that project managers really like is having

the data in a database. They don’t receive just a spread-

sheet model. Data is entered into the spreadsheet as a

database, and all the required reporting on risk manage-

ment is collected from that data, so project managers

don’t have to develop a report—they can just cut and

paste from one of the three reporting sheets that are

embedded in the tool. All the reports are standardized.

That’s good for the project managers, but it’s also good

for the people on the steering committees because they

now receive a standardized report on risks. They don’t

have a change between layouts of probability/impact risk

maps or when somebody comes up with severity or what-

ever from project to project. Everyone has the same kind

of formula, the same way of doing it.

Strategic Risk Management Lab Commentary:

The AROP process is a great example of integrating risk

assessment in terms of upside and downside risks in

the strategic decision-making process. This balanced

approach to strategic risk management allows organiza-

tions to create more stakeholder value while intelligently

managing risk.

Step 4: Preparing for Uncertainty: Defining and Testing Strategies To get further ahead in the decision process, the LEGO

Group has added a systematic approach to defining and

testing strategies. As Hans notes, “We are going one step

further upstream in the decision process with what we

call ‘Prepare for Uncertainty.’ This is a strategy process,

and we’re looking at the trends of the world. The indus-

try is moving; the world is moving quite rapidly. I just

saw a presentation that indicated that the changes the

world will see between 2010 and 2020 will be somewhere

between 10 and 80 times the changes the world saw in the

20th Century, compressed into a decade.”

He offers the following story to illustrate the forces of

change the company is facing: “My seven-year-old grand-

daughter came to me and asked, ‘Granddad, why do you

have a wire on your phone?’ She didn’t understand that.

She’s never seen a wire on a phone before. We need to

address that level of change and do it proactively.”

Four Strategic Scenarios: A group of insightful

staff people (Hans and a few from the Consumer Insight

function) defined a set of four strategic scenarios based

on the well-documented megatrends defined by the

World Economic Forum in 2008 for the Davos meetings

(see Figure 4). Hans commented:

◆ “We presented and discussed these with senior man-

agement in 2009, prior to their definition of 2015 strate-

“The changes the world will see between 2010 and 2020 will be somewhere between 10 and 80 times the changes the world saw in the 20th Century.”

C OV E R S TO R Y

F e b r u a r y 2 0 1 2 I S T R AT E G I C F I N A N C E 3 3

SCENARIO DESCRIPTION

1. More of the Same

Some growth in consumer spending,

driven by RDE markets. Technologies

emerge, but impact on toy industry is

limited/fragmented. E-tailing is

growing, and traditional retailers are

pressured—but no major changes.

2. Brave New World

Significant growth, driven by Asian

markets. Educational overhaul of/into

peer-learning where learning content

is mandatory. Distributed and

collaborative product development by

“prosumers.”

3. Cut-Throat Competition

Networking is the norm in a highly

diversified society. Customization and

flexibility are essential. Halted expan-

sion of global middle classes. Legisla-

tive overdrive and aggressive pricing/

marketing with very short lifecycles.

4. Murphy’s Surprise

Networking permeates everything.

Trade protectionism and lack of

resources hamper growth and

globalization. IPs dominate, and new

crazes permeate the globe in hours.

Powerful retailers drive market

polarization into private label and

branded products.

IDENTIFIED ISSUES

• Legal compliance is sufficient

control

• Some efforts needed to remain part

of the “good guys team,” e.g.

“cradle to cradle” documentation

• Transparency is enhanced

• NGOs and consumer groups multi-

ply and get stronger and global—

fast

• Complying with legal requirements

is not good enough—added benefit

is needed

• Globalization is almost exploding

• No major issue among consumers—

they are more occupied with other

things

• Legislative overdrive on compliance—

to some extent driven by

protectionism

• Full-steam legislative overdrive and

restrictions driven by “other

motives” of protectionism

• Globalization is effectively halted

• High demands for openness—but

no severe demands for “high

performance”

• Be extremely focused on compliance

with legal demands

HANDLING/RESILIENCE

• Adhering to and systematic third-

party auditing on “Global

Compact”

• Documented adherence to the

disclosed “Planet Promise”

• ...

• Liaise with key NGOs

• Scan blogs/Internet for expectation

on “good performance” on

governance

• Proactively use social media to

communicate with our constituents

and stakeholders

• ...

• Increased monitoring of key legisla-

tive processes (especially U.S.)

• Close(r) liaison with partners to

reduce likelihood of “unbearable”

legislation

• Focus on extremely close compli-

ance with defined legislation

• ...

• Monitoring of and lobbying on

legislation—also on minor

country/state level

• Local representation everywhere

relevant

• Enable openness on governance

practices and results

• Outperform the competition

• ...

Figure 4: Four Strategic Scenarios Based on Megatrends— Illustrative Example Based on Corporate Social Responsibility

gies, to support that they would look at the

potential world of 2015 when defining

strategies and not ‘just’ extrapolate present-

day conditions.

◆ “Having done that, we then prepared

to revisit each key strategy vis à vis all four

scenarios to identify issues (i.e., risks and

opportunities) for that particular strategy

if the world looks like this particular

scenario.

“This list of issues is then addressed via

a PAPA model whereby a strategic response

is defined and embedded in the strategy.

◆ “This way, we believe that we have

reasonably ensured our strategies will be

relevant if/when the world changes in oth-

er ways than we originally planned for.

“Once we have decided on the strategy

and defined what we’re going to do, we test

the strategy for resilience. We very simply

take that particular strategy and, together with the strate-

gy owner, discuss: If this scenario happens, what will hap-

pen to the strategy? Some of these issues will be highly

probable, and some of them will be less probable. Some

of them will happen very fast; some others will happen

very slowly. This is where the PAPA model comes in.”

The PAPA Model When looking at the scenarios, the LEGO Group uses

what it calls a Park, Adapt, Prepare, Act (PAPA) model, as

shown in Figure 5. Hans explains:

Park: The slow things that have a low probability of

happening, we park. We do not forget about them.

Adapt: The slow things that we know will happen or

are highly likely to happen—we adapt to those trends. In

our case, this is a lot around demographics. We know

children’s play is changing, we know demographics are

changing, we know the buying power between the differ-

ent realms or the different parts of the world is changing.

We also know it does not happen fast. So we adjust, sys-

tematically monitoring what direction it’s moving in and

following that trend.

Prepare: The things that have a low probability of

happening, but, if they do, they materialize fast—we need

to be prepared for. In fact, this is where we identify most

of the risks that we need to put into our ERM risk data-

base, make sure that we have contingency plans for them,

apply early warnings and whatever mitigation we can put

in place to make sure that we can cover these should they

materialize, but they are not expected to.

Act: Finally, we have the high probability and fast-

moving things that we need to act on now in order to

make sure the strategy will be relevant. In our case, any-

thing that has to do with the concept of connectivity—

i.e., mobile phones, Internet, that world—if we can see it,

move on it. We know that is changing so fast, and it’s

changing the way kids play. It’s changing their concepts

and their view of the world.

This way, we have a kind of prioritization model of

what we do because we shouldn’t, of course, be betting

on every horse in the race. That’s not profitable, and it

isn’t even doable.

Strategic Risk Management Lab Commentary:

One of the challenges of risk management is to find

ways to prioritize risks that make business sense. The

PAPA model provides a good example of a framework

that can prioritize risks and set the stage for the appro-

priate actions. Our research on high-performance com-

panies (see Mark L. Frigo and Joel Litman, DRIVEN:

Business Strategy, Human Actions and the Creation of

Wealth, 2008) found that companies who demonstrate

sustainable high performance exhibit a “vigilance to

forces of change” that allows them to manage the threats

and opportunities in the uncertainties and changes bet-

ter than other companies. The approach used at LEGO

is a great example of embedding this vigilance to forces

of change in its strategy development and strategy exe-

cution processes.

3 4 S T R AT E G I C F I N A N C E I F e b r u a r y 2 0 1 2

PREPARE ACT

PARK ADAPT

OVERALL STRATEGIC RESPONSE

SP EE

D O

F C

H A

N G

E

LIKELIHOOD Low High

Sl ow

Fa st

Figure 5: The LEGO Group’s PAPA Model

C OV E R S TO R Y

Strategic Risk Management Return on Investment A great deal has happened in the LEGO Group’s

approach to risk management based on strong support

from top management, all the time needed to develop

processes and methodologies, and a strong focus. They

have demonstrated value from the efforts they’ve made.

They also have explicitly embedded risk management in

most of the key planning processes used to “run” the

company:

◆ The Strategic and Financial Management Process—

Monte Carlo and Scenarios

◆ The LEGO Development Process—AROP in projects

◆ The Customer Business Planning Process—AROP in

collaboration

◆ The Sales & Operations Planning Process—Tactical

scenarios

◆ The Performance Management Process—Bonus based

on results, not efforts

“All of this has worked,” Hans says. “Based on actual

data, we have had a 20% average growth from the period

between 2006 and 2010 in a market that grows between

2% and 3% a year. Beyond that, our profitability has

developed quite significantly as well. We’ve grown from a

17% return on sales to a 31% return on sales in 2010. And

it goes beyond that. If you go back a couple more years, in

2004 we were in dire straits and had a negative return on

sales of 15%. We changed a number of strategies.

“Risk management is not the driver of these changes.

I’m not even sure it’s a big part. But it’s one part. It’s a

part that has allowed us to take bigger risks and make

bigger investments than we otherwise would have seen.

The Monte Carlo simulation has shown us what the

uncertainty is. The risk appetite has shown us how much

risk we can afford to take, and are prepared to take,

between the board of directors and the corporate man-

agement team. This has meant that we have been pre-

pared to make bigger supply chain investments than we

otherwise would have done and have been able to achieve

a bigger growth than we ever imagined we could have.”

Strategic Risk Management Lab Commentary:

The development of strategic risk management at the

LEGO Group provides a great example of how organiza-

tions can develop their ERM programs to incorporate

strategic risk and make strategic risk management a disci-

pline and core competency within. One of the key ele-

ments was “integration.” During discussions with LEGO

management, when Hans was asked about the ongoing

development of risk management at the LEGO Group, he

replied that it was “naturally integrated.” It is this integra-

tion of risk management in strategy and strategy execu-

tion, and the integration of strategy in risk management,

that can elevate the value of ERM in an organization.

One Last Note We want to emphasize that risk management is not about

risk aversion. If, or rather when, you want/need to take

bigger chances than your competitors—and get away

with it (succeed)—you need to be better prepared. The

fastest race cars in the world have the best brakes and the

best steering to enable them to be driven faster, not slow-

er. Risk management should enable organizations to take

the risks necessary to grow and create value. To quote

racing legend Mario Andretti: “If everything’s under con-

trol, you’re going too slow.” SF

Mark L. Frigo, Ph.D., CMA, CPA, is director of the Center

for Strategy, Execution and Valuation; the Strategic Risk

Management Lab; and the CFO Leadership Initiative in the

Kellstadt Graduate School of Business at DePaul University

in Chicago. He also is Ledger & Quill Alumni Foundation

Distinguished Professor there and is an advisor to executive

teams and boards in the area of strategy development, exe-

cution, and strategic risk management. And he is an IMA

member. You can reach Mark at [email protected].

Hans Læssøe is senior director of strategic risk management

at the LEGO Group and has spent his entire career with

LEGO in a number of areas, including portfolio manage-

ment and as a business and strategic controller. In 2006, he

was charged with establishing and managing LEGO’s for-

mal Strategic Risk Management function for which he has

received several European awards. You can reach Hans at

[email protected].

Note: Mark and Hans presented an earlier version of this

case at the RIMS (Risk and Insurance Management Soci-

ety) Conference. Both serve as members of the RIMS Strate-

gic Risk Management Development Council.

F e b r u a r y 2 0 1 2 I S T R AT E G I C F I N A N C E 3 5

“We have been prepared to make bigger supply chain investments than we other- wise would have done and have been able to achieve a bigger growth than we ever imagined we could have.”