Under what conditions should a company consider using a leading strategy to reduce transactions risk? How would the leading strategy reduce the risk? How about the conditions for pursuing a lagging strategy and how would it work?

Two factors cause company-specific risks: Business Risk: Internal or external issues may cause business risk. Internal risk relates to the operational efficiency of the business. Management failing to protect a new product with a patent would be an internal risk, resulting in a loss of competitive advantage.

Managing strategic risk involves five steps which must be integrated within the strategic planning and execution process in order to be effective:

1. Define business strategy and objectives.
2. Establish key performance indicators (KPIs) to measure results.
3. Identify risks that can drive variability in performance. Leading and lagging refers to the timing of payments on international agreements. Entities that have control over payments may find it advantageous to delay or accelerate payments based on anticipated currency changes. Organizations that choose to implement a compensation strategy that lags the marketplace may do so because they simply do not have the financial resources to pay higher rates. These employers may attempt to reward employees in nonmonetary ways to minimize dissatisfaction and turnover.