In a world that is more digital and less co-located than ever, actively engaging frontline workers in risk management, has never been more important, writes Marischa van Zantvoort from Magnifor Consulting.
With some parts of the world emerging from coronavirus, business leaders are looking at their risk management practices, positioning their organisations to thrive in the decade ahead.
To make a real impact, risk management must be integrated with organisational effectiveness, but little has been done so far to connect these two worlds – and this must change.
Frontline workers have always been relevant in early detection of risks and opportunities and actively engaging them now, in a world more digital and less co-located, has never been more important.
The profile of risk management, compliance policies, assurance practices and codes of conduct expanded after the 2008 credit crisis, but to what end? Did they prevent the devastating explosion at the port of Beirut, the grounding of the bulk carrier Wakashio, or Boeing’s problems with the 737 Max?
Were there people in Boeing and the Federal Aviation Authority who knew about the potentially fatal problems with the 737 Max before 346 people died in two crashes? Of course, somebody knew. They probably even declared the risk, but crucially, did the organisations hear, listen and act?
Leaders who seek breakthrough results must embrace the uncomfortable truth: most risks and opportunities their organisation will register in the coming year are already known by somebody in their organisation today. Knowing these in their earliest stages gives leaders a head-start in response strategies.
The antidote is engaging and motivating the entire organisation to quickly identify risks and opportunities as they surface, giving it the ability to make the right decisions, at the right time. Conversely, organisations that fail to embrace modern risk management will likely be overwhelmed as the pace of change accelerates further.
Being a company with a risk culture doesn’t mean avoiding risk. Instead it means taking more risks and grasping more opportunities. The difference is that this is done faster and with more profound insights into the uncertainty. There are higher levels of control and one is to be ahead of market trends and competition.
So how do you ensure that risks and opportunities are seen by the right people in the organisation so that teams can act at the right moment with skill and confidence?
Creating such a risk culture is a group exercise and takes a two to three-year transformation. In our experience, companies wrestle with multiple challenges, of which we can highlight two.
First is the ability to marry early risk signals with the power to act. Second is the implementation of the risk culture across all levels of the organisation. Capturing early signals is a simple concept but not an easy exercise and it only represents the starting point.
It needs the engagement of all frontline workers, making them all risk-managers, as they are the eyes and ears in the place where most risks and opportunities are born.
Unlike risk managers who often work from headquarters – or nowadays from home – with reduced ability to travel to the field, the volume of their daily encounters with risk and opportunity is high. In traditional risk-management practices, risk and opportunity insights only reach the risk-registers when they have matured – and when the response options have decreased and the response cost increased.
Building a risk culture across the organisation requires companies to capture early signals, including response strategies across all organisational levels. They will have implemented ways of working to connect these insights with the resources, expertise and power to act. This increases the ROI of their response strategies and maximises the value of uncertainty.
Crowdsourcing risks and opportunities gives all employees the chance to speak-up about the risks and opportunities they see as soon as they emerge using a tool to share their observations through a simple declaration form. Simple workflows should enable integration into business strategy, operations and compliance processes to drive learning and risk-informed decision making. It acts as a 24/7 radar capturing every risk and opportunity relevant to your business goals.
A risk management culture is not about managing risks; it is about people learning how to make better decisions. Attempting this without the proper tools and interventions is a formidable challenge. Doing it the right way means taking evolutionary steps to get to revolutionary goals.
Right now, we see companies tackling risk culture just as they do other business challenges. Yet how we perform risk management is not written in the stars, it is not a cosmological constant. We need to empower and support organisations in their transformation of risk and opportunity management, perhaps even making the impossible possible.
Wow! That was some crafty piece of creative writing which you may be forgiven for thinking it was written by a snake oil salesman.
Perhaps if Ms. Marischa van Zantvoort were to sign-on and experience first-hand, the modern day to day operations aboard vessels, she may become well enlightened to where some of the problems are. The master and deck officers of the Wakashio didn’t graduate from the local children’s crehce the week prior to the accident – they are supposed to be highly skilled individuals ……… and something clearly went very wrong, which as yet can be all to presumptuous to reach any meaningful conclusion.
“they are supposed to be highly skilled individuals ……… and something clearly went very wrong, which as yet can be all to presumptuous to reach any meaningful conclusion.”
They said they went closer to land to get an Internet signal. They said they were having a party and have admitted that due care and attention was not being paid on the bridge. Are you suggesting that they are lying?
100% of accidents involve STCW trained personnel. 🙂
Moving from a reactive “detect and respond” culture to one based on prevention and “calculated” risk it’s not just about having a Risk management team and empowering them, it’s about cultural values of the organization, because the only way to have your entire workforce be “on alert” is if they see tha tbehaviour rewarded and part of the DNA of the wider team.
Thanks for the food for thought, such leadership challenges are often masked in functional tasks , and that’s why they get overlooked.
“Avoid future problems” is a skill few employ !
Thank you for the engagement and great comments. Let me quote what was said on the tragic incident of the grounding of Wakashio by its owner.
“The probable cause of the devastating grounding and oil spill from Wakashio off Mauritius are unsafe behaviors due to overconfidence that stems from complacency, Japanese shipowner MOL said.”
Organizations that are highly reliable and rarely caught off-guard are keenly aware of their failures and consistently seek to learn from them. Highly reliable organizations anticipate what could go wrong, how they could go wrong, and dig into the small things that have gone wrong: a state of chronic unease resulting in a mindset that continually asks, “What are we overlooking and what else do we need to do?”.
Such a mindset is the opposite of complacency and could have prevented this incident and likely many more.