Time to rethink risk management

There is a wide range of risks that are self-evident and can be addressed and managed through logical and practical mechanisms and processes. These include risks pertaining to physical access and security, disaster recovery, data integrity, shrinkage, legal contracts, intellectual property, financial management and transport of cash.

Similarly, there are a host of other factors that introduce various degrees of risk such as: HIV/AIDS and its impact, the loss of executive or key talent through their departure, incapacitation, or death, unexpected and dramatic variances in currency value, war, civil unrest, unexpected attempts at hostile takeover, industrial espionage or sudden market crashes. In some instances, preventative or curative measures can be planned for and acted upon, in others one can only apply reactive and retroactive measures.

There are also a number of additional risk factors that are less tangible and often overlooked or ignored. And there are those risks that many people and businesses are blissfully unaware of.

Let us begin with the actual concept of risk itself. Without exception, a wide variety of dictionaries define risk only as it refers to potential hazard, peril, loss or danger. There is no reference to the achievement of greatness or success that may be gained from the effective assessment, management and embracing of risk. If we consider the vast majority of our experiences as we move through childhood, we will recall how many "do not dos" or "you cannot dos" there were, in place of words of encouragement.

It is not surprising then that when confronted with opportunity or challenge many adults will look to see what can go wrong, rather than what can go right. At the other end of the scale are the people who are risk junkies and more often than not put themselves and their businesses or employers at unnecessary risk and exposure.

What we are dealing with is a complete lack of education in effective risk management and optimisation. This should be included in the educational curricular as a non-negotiable life skill, particularly for teenagers and young adults. If some leaders in business had a broader, more mature and objective view of risk, we would be the richer for it.

It is important to note that any company experiencing extraordinary change will have commensurate behavioural change in the organisation.

Bryan Hattingh, CEO, Cycan

The second aspect of risk that is far too often overlooked is that of effective change management. Firstly, insufficient numbers of companies have adequate and comprehensive change management philosophies and practices. Secondly, with the dramatic rate of change in certain industry sectors and lines of business, even companies with change management practices may often forge ahead due to time pressures without conducting an end-to-end change management programme.

It is important to note that any company experiencing extraordinary change will have commensurate behavioural change in the organisation. Furthermore, in the absence of effective communication people will decide for themselves what the way forward is.

Consequently, a key factor in risk management from an internal company stability perspective is to have a fluid, transparent and ongoing flow of communication and knowledge sharing, so that the leadership and management of the organisation can more effectively set and manage expectations and perceptions.

The third aspect of risk - decision-making ability - has the potential for huge rewards, if managed correctly. It is startling that few people are ever taught life planning, effective decision-making, strategic thinking or goal-setting. Consequently, the majority of people develop their decision-making ability simply as they go through life.

The secret to effective decision-making lies in the identification of the fundamental motivators, benefits and potential outcomes of a particular area of choice. This is how we are able to establish what the non-negotiable or imperative decision criteria are, instead of focusing on factors that are often of a cosmetic nature.

A fourth and final factor and one that is possibly the most important, is the need for purposeful, focused, energised and committed leadership. Companies where the executives or leaders do not have a clear vision, strategy and well-defined plan of action, and who are not impassioned about what they do, are highly likely to under-perform or fail. Furthermore, people who work long and hard in a capacity that does not energise them, are candidates for burnout.

In short, risk management in organisations - particularly where these less definable and tangible areas are concerned - will be best achieved by leaders seeking to understand the true nature of risk, its potential, their levels of aversion to or propensity for risk, and their willingness to work at developing news ways of viewing risk. This will ultimately gain traction and impact if complemented with a clear set of processes and actions.