What is Execution risk?

The risk that a corporation will not be able to pull off something ambitious it has announced its intention to do. It might be a revolutionary new product, trying to turn a struggling corporation around, or trying to successfully take over a competitor with a very different culture.

How this risk plays out in the real world

Oct 04, 2016: GoPro’s Karma Drone takes flight, sending sports cameras into the sky
Oct 29, 2015: Bombardier CEO: We were overwhelmed
Aug 17, 2015: Google delays its Project Ara modular smartphone until 2016
Oct 07 2014: Same-day shipping & drone delivery may not be feasible: UPS
Sep 30, 2014: Turn-around expert named interim CEO at American Apparel
Jun 18, 2014: Adobe’s cloud gambit pays off as creative revenues soar 44%
May 09, 2014: CEO says cultural differences scuttled Omnicom-Publicis merger
Oct 23, 2013: Boeing soars on strong demand for new planes
May 06, 2013: Adobe Goes All-In on Subscription Pricing Model
Jan 17, 2013: U.S., Japan ground Dreamliners over fire risk
Oct 12, 2012: A BAE-EADS merger would have been too complex to handle
Apr 09, 2010: RIM Buys QNX to Tie Phones to Cars

Connection to other risks

Because this risk pertains to a specific corporation, it is encompassed by Company risk. In fact, it could take as little as one unsuccessful new product to sink a company.

How investors can manage Execution risk

  1. Be careful investing in corporations whose plans are so grand that experts in the industry express doubt about. You’ll have to keep up with the news, read the opinions and judge for yourself.
  2. Be critical of a corporation that announces a “turnaround plan” to fix its problems. One has to wonder why the company’s performance deteriorated so much that it requires a turnaround.

A final word

The flip side of this risk is that if a corporation can pull off something ambitious, which Boeing has with its revolutionary 787 Dreamliner, it can catapult itself many years ahead of its competitors! As the saying goes, nothing ventured, nothing gained