SWOT analysis is a strategic management tool bearing the acronym of Strengths Weaknesses Opportunities and Threats. It is regularly used in a risk management process to identify and assess risk elements in advance and take actions to reduce the likelihood of these events from occurring. Consequently, its application minimises the damage caused by the occurrence of these events and contains the cost of the happening that can disrupt normal organisation activities. Sometimes, the application of SWOT analysis can be used to recognise and manage risk opportunities.
The four elements of SWOT may be categorised into two dimensions. Either as internal (Strengths and Weakness) and external factors (Opportunities and Threats) or useful (Strengths and Opportunities) and harmful factors (Weakness and Threats). Strengths and weaknesses are relative to internal factors, while opportunities and threats are external elements of an organisation.
Organisations regularly combine two-by-two elements, i.e. Strengths and Opportunities to review favourable and useful aspects, and Weaknesses, and Threats to reflect on the harmful and detrimental elements. Organisational strengths broadly include economic resources, among other factors. For that, strength is characterised as a distinctive element of an organisation, thereby deriving substantial expertise. Robinson defined an organisation’s strengths to include ‘a resource, skill, or any other advantage relative to competitors and the needs of the markets an organisation serves or expects to serve. It is a distinctive competence that gives the organisation a comparative advantage in the market place’.
From the perspectives of risk management, strengths are observed when an organisation adequately follows a reasonable standard(s) to control and organise risk. Thus, with proper instruction strengths allow the risks of errors to decrease. Organisational weaknesses may exist with regards to the lack of or inadequate economic resources, among other factors. Weakness indicates how an organisation is weaker compared to its competitors and a reasonable standard. For that, weakness under risk management is the inability of an organisation to fulfil a standard judiciously. Thus, organisational weakness is in sharp contrast to organisation strength since it characterises negative and unfavourable results.