Techniques Used by One of the World’s Largest Automakers for Identifying Future Risks

We all wish we could have a crystal ball to gaze into and learn what the future holds for our business…

Being able to proactively identify what might be coming down the road in the next month, next year, or next couple of decades is invaluable in helping companies chart their future course.

Methods for identifying future risks was the subject of a presentation I had the pleasure of attending at RIMS’s ERM conference in Atlanta last October and again on a recent webinar. The presenters, Kristie Bidlake and Krysta MacDonald of General Motors, explained how they facilitate this process at one of the world’s largest automakers.

Risk sensing – 7 techniques used by GM for identifying future risks

While a crystal ball would be ideal, the following 7 methods are the best alternatives at GM’s disposable for identifying future risks. These techniques allow the enterprise risk management (ERM) team and senior management to get fresh perspectives on what may be awaiting the company either later in the year, in the next 5 years, or even a generation into the future.

The ultimate goal of these methods, besides identifying future risks, is to increase risk awareness and conversation within the various business units within the company.

  1. Sensing Network – GM uses two groups of people from within the company: 1) a network of 100+ risk officers across the company, and 2) a  “sensing committee,” which is a large group of directors and managers from throughout the company who meet quarterly to discuss risks and share data that can help the company better manage operations. Members of the sensing committee are experts in their respective fields, and taken as a whole, represents a broad range of knowledge.
  1. Examining global megatrends – This method involves looking at large areas that can impact not just GM, but a broad range of organizations. For example, digitalization will have a profound impact on the entire world for a long time to come. Not only does GM have to understand how these megatrends will affect their operations, they have to consider how they will impact their customers so they can adapt their products to meet these needs.
  1. Blindspot workshops – As the name implies, these workshops try to find the risks that no one is considering or even knows about – the “unknown unknowns” as Kristie and Krysta explain. Blindspots arise due to complexities within the organization, submissive subordinates, or a business unit’s over-confidence. A blindspot workshop at GM involves around 20-30 people from different business units and varying age groups using a “rapid fire” approach. There are just two rules: 1) everything is written down, and 2) there are no “no’s” or “but’s” heard in these sessions. To get the brain juices flowing, the group is presented with megatrends and other data. Also, participants in the workshop are separated from their direct supervisors so they can feel comfortable offering their candid assessments.
identifying future risks blindspots

Image courtesy of cartoonist Phil Watson

  1. Professional publications and networks – Reviewing industry journals, business publications and engaging in professional networks is another way for identifying future risks. What are other automakers talking about? What are other professions like accounting or legal talking about that may be applicable to GM? Reaching out into the broader world provides the company with the most information possible for understanding the road ahead…no pun intended :-).
  1. Social media listening and analysis – Another way of reaching out into the broader world to identify future risks is to see what individual consumers and professionals are talking about on popular social media channels like Facebook, Twitter, Instagram, and LinkedIn. The information gained from listening to social media conversations provides inputs into strategic planning to help GM create plans for the future. Researchers use keyword searches and develop word clouds based on the results that help GM to develop a good visualization of top issues.
  1. Workshop with college graduates during recruiting events and job fairs – Another method for identifying future risks is speaking with the next generation of engineers, scientists, marketers and line workers at recruiting events. Engaging the youth on what they see as risks or threats to the company’s future success is an invaluable way of ensuring the company is able to meet its strategic goals, remain a dominant player in the auto market, and stay a viable carmaker to the younger car-buying consumer.

future risks pre-mortem

  1. Pre-mortem workshops – While this may sound a little morbid, looking ahead for a specific amount of time and assuming the company has died is a good way to identify future risks. Participants in these interactive sessions brainstorm on what went wrong, be it internally (i.e. customers or supply chain disruptions) or externally (i.e. financial market turmoil). Holding a pre-mortem workshop helps the company correctly identify drivers of future outcomes, so they can be avoided.

With a list of risks in hand from these types of inputs, the company is then able to prioritize and factor them into its strategic and business plans for the next 1, 5, 10 or even 20-30 years.

A couple of observations…

One theme I constantly noticed with these methods is how they utilize outside perspectives for identifying future risks. For example, the blindspot workshops intentionally use individuals from other business areas to bring fresh perspectives, which is a key element to effectively implementing a successful ERM program.

By extension, the sensing committee, blindspot and pre-mortem workshops also identify and share insights across siloes or business areas so the entire company is aware of these future risks. Breaking down siloes between IT, HR, customer experience, economics and more is one of the key differences between ERM and traditional risk management.

What methods does your organization use for identifying future risks?

How do you take this information and funnel it into developing your future strategy?

Feel free to leave a comment or question below, or join the conversation on LinkedIn today!

And if your company is looking for ways to identify future risks or simply get your ERM program off the ground, I invite you to contact me or continue browsing ERMInsightsbyCarol.com for more articles.

Cartoon image courtesy of Phil Watson via http://www.shaaark.com/

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5 Comments. Leave new

Ramesh Venkataraman
March 2, 2017 11:58 pm

Am surprised they do not talk to analysts

Reply

    Hi, Ramesh. Thanks for commenting. If I remember correctly from the session at the RIMS ERM Conference, they mentioned talking to people from all levels across the company. So I would think that they do talk to analysts, management, and executives. Otherwise, how do they get the full view of risks across the organization? And when they do include non-management individuals, they make sure that their management is not in the same session. This helps ensure that there are no stifled ideas or comments.

    Reply

Thank you, some very useful ideas about engagement with stakeholders to gather their perceptions of the context and uncertainties (the “straws in the wind before the hay bale hits you”) but can you distinguish between future risks and (by implication) current risks? Risk is defined in ISO31000 as “effect of uncertainty on objectives” suggesting that all risk is in the future (if it is “now” it is an issue).
PESTLE analysis is useful technique to way of structure discussions one-on-one and in workshops and could help structure some of the approaches in the article. That said, there are times when “unstructured rambling conversations” produce gems.

Reply

    Hi, Chris. Thanks for a great question about future versus current risks. I think of it like this: there are risks are currently pose a threat to your company, and there are threats that may appear in the distant future. Some of the techniques described by GM are better for the current risks, but most of them are looking into the distant future to try to predict or anticipate what may be coming down the road. It also helps companies prioritize risks to separate risks by a timeline of impact, also called velocity.

    I separate risk from issues using this train of thought: a current risk has a chance of occurring with an impact. An issue is already occurring, and the company is feeling the impact.

    Feel free to let me know if you have any other questions! Thanks,
    Carol

    Reply

[…] talk about social media listening in an earlier post about how General Motors identifies risks, which provides some ideas on how social medial listening results can be […]

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