Thirteen years ago we had the global financial crisis.
THIRTEEN YEARS! It seems like yesterday.
We are clearly in another period of heightened risk awareness globally.
Every business is very aware of uncertainties that have grown across our field of vision, uncertainties that can lead to healthy business opportunities and serious business challenges and even threats.
Whether the risk of the day is COVID, inflation, the economy, working changes, fuel costs, environment, climate, supply chains, cashflow, third parties or one of the many others, there is understandably a great deal of focus on risk, and thus risk management.
Over the past decade or two, businesses have enhanced risk-related processes and oversight structures in order to detect and respond to risk events long before they become full-blown disasters. This is a good thing.
Yet processes and oversight structures are only part of the story. The front line attitudes and behaviors of all of us are the real “first line of defense”. Attitudes and behaviors of individuals are what collectively create “culture”. So, by definition, every individual can contribute to, or participate in, a change of culture.
Having a strong risk culture does not necessarily mean taking less risk. Far from it. It enables better “risk informed decision making” which can equally result in the perception of taking more or less risk.
We should encourage the attitudes and behaviors we want, and thus develop the culture.
We should encourage quality of thought, speed of action, collaboration beyond narrow departmental boundaries, rapid escalation to address issues (breaking through rigid governance mechanisms) and transparency, making early signs of unexpected events more visible.
We also need to encourage confidence among managers to acknowledge and discuss unexpected events and risks.
Effective risk management requires vigilance, honesty, transparency, communication, collaboration, and a sense of urgency and yes, courage!
Alexis Krivkovich and Cindy Levy of McKinsey wrote an interesting article “Managing the people side of risk” on this topic some years ago, but it is highly relevant now.
It is worth a read here . . .
Attitudes and behaviors are the human side of risk.