Managing risk Archives

“I’m afraid of what I don’t know,” the CEO of the rapidly growing company said to me as I advised him one day.

“And I’m afraid of what I can’t see.”

He feared dire circumstances could occur and wipe out his thriving company.

This CEO was worried enough that he longed for a good early warning system he could use…if there were a way to create one.

I created an early warning system for him, one we ended up calling the “edge of cliff analysis” because it addressed his key fears for his company…and a few others he had not thought about.

It was a tool he and the company reached for, and used, for years afterwards.

To create the “edge of cliff analysis,” and to make sure it worked well for them, I worked with a wide range of people at the company to understand serious and unexpressed fears they had for their company.

It was like uncovering and understanding a high-risk puzzle, and then providing an action-oriented dashboard to guide them.

It helped them prioritize improvements that would reduce the most likely risks to the company, while providing them significant measures, and the ability to use them well, in order to help them know if problems were starting to emerge.

And then we made sure the decision-making and prioritization framework is one that people inside the company could and would use. (And they continued to reach for and use it, I heard through the grapevine, for years afterwards).

Do you, too, long for a sense of command in otherwise challenging and unpredictable circumstances?

Do you ever wish for an early warning system such as this CEO did?

If so, here are the basic steps we used to create this rapidly growing company’s early warning system:

– Start with your fears

We called this the “edge of cliff” analysis, and started with the CEO’s greatest fears.

He had lived with heavy but ambiguous worry for some time.

He hadn’t yet articulated his fears clearly, and this step alone, of articulating his worries, helped turn them into something actionable, and something positive.

– Turn them into scenarios

We considered his worst-case scenarios and the probable consequences of each for his clients and company.

We also considered best-case scenarios (they are so much more fun to think about…and we needed those, too, for a bit of relief in this work).

And then we considered what would happen if the best scenarios turned out, in real life, to be even better than we dreamt. We also considered situations where something far, far worse than the worst that he feared happened.

This stretched our sense of what the early warning system needed to accommodate, and to flag for preventative, or adaptive action.

– Make your early warning system goal clear

Identify what you want your early warning system to do for you.

Next, consider who will use the information, and what they will hopefully do with it.

Check in with the future users of the information to see what they need in order to make the information easy for them to use to identify and take the right actions.

– Gather external information

In this client project, I had to find a proxy for customer satisfaction and frustrations, in lieu of talking directly to their customers.

I looked to see what promises the company made, or implied, to their customers through their marketing and advertising materials.

This told me what processes inside the company had to work flawlessly, under all different circumstances, no matter what was happening outside the company.

– Synthesize

Working with the leadership team, I verified and clarified which processes had to be top-notch in order for them to continue to thrive.

We mapped this to the most likely scenarios they might face, and identified which processes put them at highest risk, if they were not strengthened and improved.

– Organize and communicate

We organized and simplified the work, making it easy to understand and use.

We had no interest in creating a system that just looked good on paper. We wanted one that would be successful in real life and real business.

Next, we trained people, helping them see what valuable part they played in making the early warning system work successfully, and do what it was intended to do to keep the company safe and thriving.

The early warning system turned out to be a combination of crystal ball, fire drill, and strategic change management system all rolled into one.

If you’d like more information about how to do a scenario analysis, or how to do an “edge of cliff” analysis for your business, let me know.

Here’s another post you may be interested in:

You place your bets when you set strategy

cour·age, noun

The quality of mind or spirit that enables a person to face difficulty, danger, or pain without, or in spite of fear; bravery.

We admire courage when exhibited by others.

Yet do we want to be in situations where our own courage is called for?

In a word, no – or most people don’t.

Such times center around high-risk circumstances that could so easily go wrong. But for so many reasons…and because they may affect many people…situations that call for courage really must go right, somehow.

Not surprisingly, great courage is one of the top characteristics of great leaders.

What does courage really involve?

Courage is the ability to look beyond one’s own fear, to find and draw on one’s strongest reserves to get a critical job done, no matter what stands in the way.

It is the ability to assess risks and reduce them however possible, and yet to carry on with integrity in the face of the risks that still remain.

Courage, as a leader, is also the ability to incite a group to move forward and to continue to work toward a goal in spite of what may be their natural desire in a risky situation to freeze in place, or retreat.

When you hear the word, “courage,” what people and situations come to mind?

Is it Captain Sullenberger and his co-pilot, who brought US Airways 1549 down safely in the Hudson River, and the team of many people on land and in rescue boats who rapidly coalesced, moved into action, and ensured that everyone from the downed plane was saved?

Is it Neil Armstrong and Buzz Aldrin, the first men to walk on the moon, and the achievements of many other people, over many years, that led to those first lunar steps?

Is it Marie Curie and other scientific explorers who forge on despite uncertainty, doubt and resistance, making discoveries that benefit many people in countless ways?

Perhaps the courageous people and circumstances you think of involve world leaders, whether elected or personally inspired to act based on the strength of their beliefs.

Gandhi, Martin Luther King, Jr., Franklin Roosevelt, Winston Churchill, and many other leaders in history led people they inspired through sometimes dark and difficult days.

Of course, there are many other courageous leaders who may inspire you. And more will emerge through the course of history.

We can also see courage in people around us, in our daily lives. These may be people who are not widely known so their acts of great courage may be quiet, even subtle, but still significant, and deeply inspiring.

You, too, have surely exhibited courage at times.

Think back to times when you had to press on – and did – even though you might have wished to give up and admit defeat.

In those circumstances:

What were your beliefs – before the danger or difficulty arose – about what you were capable of handling?

When pressed by circumstances, what did you discover that you could, in fact, handle?

Did tapping your courage strengthen it, and enable you to be courageous again in the future, when needed?

Here are guidelines to help you increase your comfort and preparation for uncertainty…and to prepare you to be courageous when needed:

1. Anticipate and prevent problems from occurring in the first place.

That’s easy to say, and not so easy to do, but it works much of the time. It requires good foresight, planning and follow-through.

It also calls for, among other things, strong risk assessment, problem analysis and prevention skills.

2. When, despite your best efforts, danger arises, do your best to size up the risks, and quickly control the things you can control.

This may also enable you to reduce, as much as possible, the impact of factors that you are less able to control.

3. Also, set up systems to monitor key aspects of the situation you are facing to help you decide as early as possible what actions to take.

In circumstances requiring courage, conditions are likely to be changing rapidly.

Create an early warning system of some type, if you can, and do so ahead of time if you can anticipate that a situation is volatile, unpredictable.

Know, however, that you won’t have perfect information at times such as these.

Just get the best information you can, as quickly as possible. Then use that information to guide the best decisions and actions, moving forward.

4. Check in with your team in simple but effective ways.

You need to stay in close touch with others on your team. However, keep the information exchange simple, and focus on the most important decisions and details.

5. Stay the course, as long as you can tell that it is working.

Don’t be blind to what you find. At the same time, this isn’t a popularity contest. There’s a risky, and possibly even a physically dangerous circumstance to be fought.

Pay attention to the information you have, as well as your own intuition, and prior experience if you or others on your team have experience that’s relevant. And, of course, as always, use your good common sense.

At times when courage is called for, your quiet inner strength and wisdom is an invaluable asset.

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How to create an “edge of cliff” scenario analysis to prevent big problems from occurring

Leadership excellence: Courage is power