Ceb risk management leadership council

CHAPTER 6 Strategic Risk Management at the LEGO Group Integrating Strategy and Risk Management

MARK L. FRIGO

Director, Strategic Risk Management Lab, and Ledger & Quill Distinguished Professor of Strategy and Leadership, DePaul University

HANS LÆSSØE

Senior Director of Strategic Risk Management, LEGO Group

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 strategic 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.

In this case 1 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 Management Lab at DePaul University, which is identifying and developing leading practices in integrating risk management with strategy development and strategy execution. This descriptive case provides a great example of integrating risk management into the strategy development and strategy execution.

ABOUT THE LEGO GROUP

Headquartered in Billund, Denmark, the family owned LEGO Group has 12,500 employees worldwide and is the second-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 Kristiansen founded a small factory for making wooden toys. Fifteen years later, he discovered that plastic was the ideal material for toy production and bought the first injection 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 produced in plants in Denmark, the Czech Republic, Hungary, and Mexico with the greatest of precision and subjected to constant controls. There are more than 900 million different ways of combining six eight-stud bricks of the same color.

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 strategic risk management in an organization: to understand the business strategy and the related risks as described in the strategic risk assessment process. 2

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.