Is your firm managing risk as well as it should be?

SPONSORED: From bottom-up leadership to a learning-based culture: discover the five key characteristics you need for good risk management.

by MT Staff
Last Updated: 17 Nov 2016

Every business encounters operational risks – whether that’s a key supplier going bust, an employee falling off a ladder or a database of customer records getting hacked. There’s a clear benefit to managing these potential incidents correctly – and it goes beyond mere damage limitation. Operational risk management (ORM) can also improve your company culture and empower your workforce – making them more innovative and better at solving problems. So not only will your risk management become more effective, but you’ll be creating greater value too.

Here are five organisational characteristics that make for excellent ORM:

1. Risk awareness

In order to be able to manage risks, you have to spot them in the first place. And it’s not just a matter of ensuring your top people are eagle-eyed. Employees are often better placed to identify issues, so make sure they’re clued in on what to be looking out for. Show them the rationale behind how things are currently done, and that these systems aren’t set in stone: by demonstrating the complex and shifting nature of risk, you’ll make them more alive to the dangers.

2. Bottom-up leadership

Managers need to actively seek input, rather than assuming they have all the answers – so encourage communication up through the organisation. Line managers can be key players here, forming a vital link between those on the ground and those controlling the strategy. These days, as teams disperse and spread, leadership requires less over-the-shoulder management of employees, who should adopt the attitude of being a leader, rather than needing one.

3. A collaborative and team-based culture

Individuals become more empowered when they’re put in small groups and given freedom to work together. They’ll get better at finding solutions to risk and assuming leadership roles. A recent survey by DuPont across a national home improvement chain showed that managers could empower team leadership if they ‘delegate enough autonomy and responsibility to all members of their team, involve the team in decision-making, and encourage the team to self-manage its performance’. But this must be balanced with more formal leadership – otherwise you risk group dynamics, turf wars and individual career goals rocking the boat.

4. A sense of ownership and pride

In a reactive environment, employees won’t take responsibility. So the question to ask is whether safety in your workplace is seen as simply a matter of following rules that someone else makes. If it is, employees are more likely to sleepwalk into further incidents. Encourage your teams to feel ownership for safety and soon they’ll fixate on achieving set goals of their own: like a target of zero injuries. Seeing these are achievable will drive them on.

5. Embracing learning and development

Human error plays a huge role in operational risk. Research by DuPont found that 82% of workplace incidents come down to poor decision-making. It’s unavoidable: people are inherently fallible, but it’s them who make businesses function. So instil a culture of learning and development – make training an interesting process, encourage people to improve, and offer incentives for progress. By getting people to buy into the bigger picture, they will look at the business in a new way, form a new habit of spotting anything that needs improving, and tell the right people about it.

By building an ORM strategy on these foundations, organisations can establish a culture of greater engagement, with employees proving more adept at problem solving and innovation. Risk management will become more effective, and the bottom line will improve. Now where’s the risk in that?

Find out more from DuPont about how operational risk management can build a strong business foundation.

Explore why good risk management is good for business (and employees’ happiness)
Discover the five reasons firms need to manage their operational risk

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