In my inaugural blog post, it seems fitting to discuss the oft maligned focus of my career: Risk Management.
Risk is one of those four-letter words that no one really wants to utter in polite company. A friend of mine once equated my work to that of a swamper…. the lucky soul that hangs off the back of a boat scooping up all the nasty stuff in the water. On some days, I dare say, I had to agree. Traditional risk management focuses on hazard loss, which means every time something bad happens a risk manager shows up. And because risk managers emerge predominately from insurance and safety industries, they bring (appropriately) a highly risk-averse approach to the function.
But here’s the thing – risk management happens in every facet of every organization on every day. Decisions are made based on opportunity, cost, efficiency, resources and reputation – all are a balance of opportunity and risk. What is not so obvious is that those decisions are also influenced by each person’s unique thought process, experience, knowledge, awareness and bias. At the executive level, shared expertise and healthy debate helps to balance these variables, but what about the vast number of daily decisions made outside of the senior management team? A crap shoot? Maybe. Does it have to be? Nope.
By defining the organization’s tolerance for risk, how it measures risk, and creating a common language for discussing risk, the volatility of individual perception is dramatically reduced. The resulting cross-functional dialogue empowers middle management, creates efficiencies, and reveals critical information to escalate to the c-suite – all of which enhances strategy decisions and execution.
While traditional hazard loss management is a legitimate and necessary function, it’s time to recognize the value of a more dynamic and inclusive risk/strategy discipline!