Too often, we get so consumed with the day-to-day that we forget to take a step back to look at the bigger picture. In our personal lives, this could take the form of being too hurried going from one thing to the next that we don’t stop for a moment and take time to just breathe and reflect.
As a risk manager, it’s easy to get so caught up in the actual risk management process that we forget to take a step back to think about the bigger picture of our role. One important, yet often underappreciated, component of proactively managing risks is to evaluate issues in the broader world and how they may impact your organization’s success.
Real briefly, the story discusses the large number of “zombie” firms in the insurance industry, the impact this is having on rates, and the potential for a rash of bankruptcies should stimulus and bailouts be withdrawn. Of course, this spawned a few questions for me like…
- What risks would the collapse of other firms in the industry mean for my clients?
- What does a zombie company have to do to avert collapse?
- How much of a company’s operations are being funded through bailout funds?
- For healthier companies, what acquisition opportunities are there? Could they acquire any of these failing firms for pennies on the dollar and thus improve their position in the industry?
This isn’t the first time I’ve examined how external issues can affect a company achieving its objectives. I published an article on the threat of inflation earlier this year, and in the past, I have looked at how changing dietary preferences are impacting iconic food brands and how changing trends in car ownership could impact auto manufacturers. Issues that other risk management thought leaders are regularly discussing include climate change, cybersecurity, the pandemic, or the impact of rapid technological advances on organizations.
A little paranoia on your part isn’t a bad thing…it’s how CEOs think.
Thinking about economic, political, or natural events in the broader world and analyzing their potential impact on the organization, positively or negatively, is something CEOs do all the time.
As I discuss in a recent piece on ways to improve ERM’s reputation, the 2021 State of Risk Oversight Report from NC State clearly showed how the vast majority of executives feel that their risk management processes are not delivering any sort of strategic or competitive advantage.
In a presentation at 2019’s Risk Awareness Week, international management consultant and author Julian Talbot explains that CEOs really care about:
…the strategic risks; things that could bite us in the long run. That was what we really care about. Yes, we cared that we had the right tools and framework, but ultimately none of that mattered so much as understanding what our risks were…it’s not really about the processes, it’s about the people, and a healthy paranoia.
It’s clear from this quote and NC State’s annual report that processes aren’t terribly important to a CEO.
So rather than always focusing on risk identification, assessment, and other processes, take a step back to study issues out in the broader world, how they might impact the organization, and ways you can help the company improve the risk or seize the opportunity. Always be asking…
- What’s currently bothering the CEO and other executives?
- What is the CEO thinking about in the distant horizon?
- What issues are bothering me right now?
- How can I help?
- What are tools at my disposal (i.e. scenario planning, root cause analysis, quantitative/Monte Carlo simulation, problem definition worksheets, etc.) to help CEOs better understand and handle ambiguity/uncertainty?
Building on last week’s post on improving executives’ perceptions of ERM, for risk management to remain relevant and engaged, risk managers should not be so stuck on “processes.” Standards like COSO and ISO 31000 can help and have their place, but simply copying and pasting a particular standard into your organization is not exactly what a risk manager is there to do.
At the end of the day, our job is to help our organizations gain a better understanding of uncertainty facing the enterprise, or as Julian Talbot discusses in another session at 2020’s Risk Awareness Week:
We have this anxiety, and you can’t wish away anxiety – the only way to deal with it is to use it as a tool, look at what’s making you anxious, go ahead and address it. Define this uncertainty and make it your friend. You’ll find that a lot of people in business and life have trouble dealing with ambiguity. As a risk manager, that’s our entire job, that’s our ethos, that’s what we do, and we have to help people understand and manage their anxieties.” [emphasis added]
Therefore, news reading and other activities on understanding issues in the broader world and figuring out how they may impact your organization should not be considered wasted time. It very well may end up proving the value of ERM to your CEO and other executives and provide you with a powerful advocate in your corner.
What issues and events in the broader world do you follow and analyze to understand impacts to strategic objectives?
How did the CEO react when you framed these concerns to the executives? Have they been more receptive to the value ERM can provide?
To share your thoughts on how to better understand the impact of external issues on the achievement of objectives, please feel free to leave a comment below or join the conversation on LinkedIn.
And if you’re struggling to shift from a process-centric to a more broad-based approach that considers factors more in line with your CEO’s thinking, please don’t hesitate to contact me to discuss your company’s specific situation today!
Featured image courtesy of Jay Clark via Unsplash.com