Are you blind to the risks you face?

SPONSORED: As a leader, you need a deep understanding of the risks facing your firm - be they tsunamis or suppliers going bust. Here's how to be more risk-aware.

by MT Staff
Last Updated: 14 Dec 2016

Leadership is a deft balancing act – of maximising gains while minimising losses – so it’s essential to have a deep understanding of the risks facing the organisation, whether that’s traffic accidents, tsunamis or suppliers going bust. Indeed, while leaders are generally aware of their financial challenges, many are less familiar with these operational risks, the ones that are part and parcel of simply getting the job done.

5 ways to be more risk-aware:

1. Log it
Hardly rocket science, perhaps, but the first step towards being risk-aware is to systematically list all your departments, activities, processes and stakeholders – and then identify every spanner that could potentially jam itself in the works. Operational risk management (ORM) is built on logging the likelihood of each such event, how often it may occur, and the severity of the consequences if it did. Only once you’ve got this basic level of awareness can you go about setting up all the juicy stuff – like your teams’ performance metrics and KPIs, risk priorities, and resource allocation.

2. Use the data
These days even the smallest organisation will be receiving data from more and more devices, each increasingly connected, and risk management is just one more area of work that can benefit from the deluge. But that data is useless if it’s simply data for data’s sake. If you invest in intelligent systems that can break it down in a way that allows you to pull out the value for your particular business, there’s less and less reason to be unaware of the risks you face.

3. Understand your people
People take the biggest risks automatically and intuitively, often because past experience suggests it’ll be absolutely fine (why not tackle the M1 at 105mph if you’ve never had so much as a paint scratch or a wave from the police in the past?). So while building risk management systems is a must, you won’t get far just on reason and rational thinking; you also need to know what drives your employees’ decisions in the first place. This means venturing beyond the logical and down the bumpy roads of emotion and human impulse.

4. Listen to those at the front line
If you’re running a coal mine, it’s easy to see who’d have the starkest knowledge of the risks being run every day. So get out and see their reality for yourself as much as you can, and be humble in asking and learning about it. The trick here is to formalise the line of communications upwards, and to make everybody accountable: this makes individuals more engaged and empowered to affect change, and it’ll encourage greater sharing too.

5. Risk reaching out
When DuPont surveyed risk managers, more than 60% said they used networks and peer-to-peer forums to find inspiration for workplace safety. More than half read online blogs, articles and Twitter for ideas from the likes of Daniel Kahneman, Leandro Herrero and Robert Long. It all helps increase awareness, both of the challenges and new and unique methods of tackling them. There are more and more of these: according to DuPont, artificial intelligence and pioneering psychology will both have a big role to play in risk management, the next generation.

It is of course daunting to try to stay aware of risk in such an ever-changing environment – when an organisation’s activities are playing out both across physical borders and over the digital divide, and against a backdrop of intense political upheaval. But leaders can banish the spectre of ignorance by building the right systems and by sharing responsibility, data, experience and ideas.

Read more tips on developing your risk awareness and achieving operational excellence.

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