Managing risk

Managing Risk

Our Internal organisational, micro and macroenvironmental analysis is now supporting our understanding of the developmental needs of an organisation.

But which decision to take now?

How do we establish our priorities and the development needs?

And …..Why RISK MANAGEMENT?

Risk Management is a discipline for dealing with the possibility that somefuture action or event will cause some harm.

Risk Management can be as uncomplicated as asking and answering 3 hard but basic questions:

1. What can go wrong?
2. What will we do if it does?
3. How will we pay if something does go wrong?

These three questions apply to Human Resources, Health and Safety issues and to Financialrisk.

Simply speaking:

A risk is an uncertainty about a future action or event, that threatens the organisation’s ability to accomplish its mission.

Company Strategic Plans must clearly address all aspects of the range of risk and again, I refer you back to our work on Value Chains and Linkages.

Cause and effect are the main drivers of this analysis and the negative impact on anorganisation of the Company’s failure to implement an effective Risk Management Strategy is unpleasant to contemplate.

As a Manager you need to ask:

• What would it take to make your business fail?
• What conditions would start that downward spiral?
• What would cause the complete financial collapse?

For example – if your main rival or competitor acquired the company, where wouldthey ‘strip out’ the expenses? What assets would they covet and take? (one famous company well known in the UK is run by John Hanson – who is chiefly known as an ‘Asset Stripper’!)

These are not pleasant questions to consider – but as a Strategic Planner they are exactly the questions we must ask ourselves.

I referred to the Competitive Intelligence teams focussing on ‘worst case scenarios’.No-one likes to think of potential failure – yet in a calm, professional business environment, it can be one of the most positive discussions a management team can have.

Creating a VISION OF FAILURE, will force Management Teams to:

• Critically understand, challenge and test the assumptions that your Strategy is built on.

• Look at the business as an objective third party might• Discover the clarity within all the SWOT analysis findings

• Put that Risk Assessment into a broader and more useful context

• Be truly innovative in finding new sources of growth and strength

• Learn to recognise potential warning signs of real failure – before it is too late

• Align their thinking on key issues that usually remain hidden and unspoken (justremind yourself about the quality of Leadership/Management, Communication pathways for colleagues etc.)

After a successful Risk Management meeting, the result should be a solid statement of ‘just how bad things could get and how they will occur’.

This VISION OF FAILURE approach will be useful if it is Strategic and Specific.

Moving forward with planning for this Management of Risk, whatshould it show?

• A 3-4 year flexible planning horizon

• Clear performance indicators

• Strong timelines for success

• Accountabilities for all members of the management team.

The positive impact of such an exercise is likely to be:

• a greater confidence in the purpose of management meetings

• a greater sense of cohesion amongst all the different sectorsof the business

• a better sense of the positive direction for all the primary stakeholders

Now turn to and read through Page 127 of the Handbook

When we consider all the aspects of potential growth and development for an organisation, the Risks can be great – one way to review these potential areas of growth is on the BCG Matrix, and then move to the General...