Today is the first day of the new year. Traditionally, this is a time of refreshed energy in pursuit of new goals and initiatives. However, this year is different, as (with luck) it will mark our rise out of a global recession.
Because of this, our hopes are larger than average (while our margins for error are smaller.) As a result, we are presented with large risks—both positive and negative. The better we actively manage these risks, the more successful we will be in 2010 and beyond.
What does it take to actively manage risk (ARM)?
- The commitment to do so. This may sound obvious—it is not. Those who actively manage risk, not only shift their attention from concentrating on “what is going to plan” to “what unplanned things could happen,” they also reward this type of thinking.
- Continuous focus on identifying, assessing and prioritizing risk in all of its forms: internal and external, actual and perceived, positive and negative. Risk is dynamic. You cannot plan for it upfront; you need to think about it all the time.
- Systematic approaches to communicating and responding to risk. This is not possible if you have not made the commitment to actively support and reward concentration on “the unplanned.”
- Built-in ability to adapt and manage the emergence of issues due to undetected or unforeseen risks. (A keyword here is “agile.”) This requires a change in how you plan – and your comfort level with “planned uncertainty.”
Actively managing risk is not a trivial exercise. However, it is also not a monumental one either. By adopting a series of best practices, enterprises can quickly start the new year with an aggressive focus on managing risk. The benefits of this are enormous:
- Increased likelihood of success
- Reduced cost and time overruns
- Faster response to changes in business and environmental conditions
Over the next few weeks, I will write in greater detail on this blog about how I have led organizations across five global industries to perform each of the above four activities.