Key Internal Stakeholders

A stakeholder is defined as anyone who has a stake or an interest in some activity, project, or
enterprise; or in this case, the organization as a whole. Stakeholder theory offers a more enlightened
perspective, compared with a narrower focus on the immediate beneficiaries, such as shareholders.
Being aware and taking account of those interests enables managers to secure support as required and
to anticipate resistance to an initiative. This analysis is an extremely important management activity. Organizations exist to serve the needs and interests of their stakeholders by:

1. Delivering a sought-after service or product to customers.
2. Providing financial returns on an investment to investors and owners.
3. Paying amounts that are due in a timely fashion to suppliers.
4. Creating a safe, attractive work environment.
5. Providing accurate and timely data on pay to tax authorities.

Sometimes these interests can be in conflict. One party’s efficiency gain might be another ’s cut in income, and one party’s enhancements to product quality and service might be another ’s erosion of profit. Two primary stakeholders—the owners and management—sometimes can be in conflict, as the managers might seek personal or short-term gain, while the owners desire long-term returns on their investment. Organizational boundaries are often indistinct. For example, where does the organization end and the stakeholder begin ?

Managers are quick to realize that stakeholders wield great power. Customers may withhold their business, investors may withdraw their capital, employees may take industrial action, the government may raise taxes and increase regulation, pressure groups may lobby for greater environmental protection, and the public may demand greater transparency and ethical leadership.
Like other organizational endeavors, risk management processes should be designed to reflect a
balanced response to the needs and interests of stakeholders. This requires careful analysis, but it is
not always easy to identify the stakeholders and their interests, and even when they are known, they
may be subject to change. Often, an individual may span several stakeholder groups (an investor who
is also a customer, an owner, or shareholder who is also part of the executive team). However, despite
these problems, the analysis is still very valuable as it leads to greater sensitivity to potential sources
of conflict or opportunities for support.

Stakeholder analysis can be applied to any planned activity and development, including strategic
planning. When developing and reviewing risk management processes, asking key questions will help give due consideration to the needs and expectations of stakeholders:

1. Whose interests will be affected (positively or negatively) by risk management ?
2. What are the interests or stakes (objectives) of these stakeholder groups ?
3. How could these groups impact (positively or negatively) on our ability to implement risk
4. management ?
5. What strategies can we adopt to anticipate, mitigate, and exploit the reactions of stakeholders to make risk management processes more successful ?

Simple measures, like involving stakeholders in the development of "risk management processes" and keeping people informed, can deliver the greatest benefit in stakeholder management.
Stakeholders may be categorized as being internal or external. Some refer to connected
stakeholders, such as non-executive directors who cross organizational boundaries between internal
and external stakeholders, and peripheral stakeholders who only have limited and intermittent
interests.

Staff interests may be promoted by official or unofficial representatives, trade unions, and similar
kinds of associations. Managers and directors may be considered to be part of staff as employees of
the organization, but they are also likely to have other personal, financial, and professional stakes in
it. The owners in a private sector organization look for a financial return on their investment and
have an interest in seeing their vision come to fruition.

All of these groups are internal stakeholders. In the public sector, the government department, body, or agency manages the organization on behalf of the public at large or specific groups within it, and these too become internal stakeholders with a greater or lesser degree of direct influence, depending upon the decision-making structures. Risk management processes must serve the interests of the organization and enable it to achieve its objectives. It is important to understand the impact risk management processes have on internal stakeholders.