What’s the best way to manage business risk?
Go toward it.
Sounds risky, itself…walking toward the thing you fear?
It can be.
The alternative, however? Far worse.
Real business risks, ignored…well…it’s not pretty.
Remember, first, that not all risk is the cliff diving, high-flying, life-defying kind.
Circumstances that bring these types of extreme risk are, frankly, circumstances you can’t control anyway.
The national and world economy, for example is something you can’t do a lot about, individually.
Devastating acts of nature…same thing. You just have to be ready to adapt well to circumstances such as these, however things work out.
If these are the risks you worry most about, scenario analysis is a tool that could be helpful to you. I’ll tell you more about that in a post later this week.
Second, the real risks in business are often things you can do something about.
And these risks are not far away. They’re often already inside your company.
They’re the risks that you either created (often unwittingly) or that you perpetuate by not addressing problems fully and directly.
Any of the following situations are a risk to your company. And these are all circumstances you can do something about:
– Lack of focus
– Inattention to important details (the details your customers care most about)
– Lack of clear and complete communication
– Inaction or ineffective action when a problem is discovered
– Confusing, inconsistent and ineffective ways of getting work done
– Ineffective and frustrating hiring, onboarding, training, managing and mentoring practices
The signs of potential risks and trouble can be subtle…or glaring.
And because you’re in the middle of the situation, you may not really see or grasp problems until they’ve been festering for a long time. You may have simply become used to them, and think that’s the way things are, and the way things will always be.
Start to remove risks inside your business in these ways:
Start by considering the parts of your business that feel in control.
What gives you confidence that these things are working well?
Next, think about what feels out of control.
Which of these worry you the most, and why?
Be specific as you create both the “working well” and “worrisome” lists.
2. Pay attention
Don’t assume that all is as it seems.
What assumptions are you making that you need to check? (Often, you’re either very right, or very wrong in assumptions that you make).
What data and information do you have, or wish you had…and can get…to monitor and manage the things you’re most concerned about?
If risks prove to be real, the information you wish you had is information you’ll want to figure out how to gather and put to work.
3. Go toward the risk, and test to see if it’s real
Work to understand what’s really going on before you jump into action to prevent, mitigate or manage perceived risks.
Observe, research, inquire, test in whatever ways you can to start to see if the risks are real, or they’re worries that are unwarranted.
By the way, people may say, “Our work is different. We can’t possibly measure and manage what we do.”
I’m here to tell you, as a former operational analyst and process auditor at Apple and elsewhere, that there are ALWAYS things you can do to see how things are really working, compared to how you think they’re working, or how you wish they were.
The information you gain in this way is always clarifying. Usually, it helps make things work better for everyone involved. And that, when it happens, is good for employee morale, customer satisfaction, and, as a result, profits.
In addition, get to know people who can advise or teach you. They may quickly see potential problems that you’re blind to or are purposely avoiding. They can also help you figure out how best to address problems you might have missed.
5. Chunk the action
If changes are necessary, once you understand the risks that are present, break the change into a series of achievable actions.
You’re more likely to do the work if you “chunk” it into manageable projects and tasks.
Suddenly, big goals that were daunting or immobilizing become accessible and motivating as you make steady, observable, and felt progress, step by step.