Creating to a culture that enables active risk management

In my last post, I discussed the importance of employing active risk management (ARM) in today’s business and economic environment. Before organizations can systematically implement ARM, they need to commit to making a cultural change that encourages a free and open focus on discussing and escalating risks and the actions need to manage them.

The first step is a change in culture

The very first step down the path becoming an organization that used risk-based approaches to program and initiative execution is purely a change management one:

Your entire chain of command—from executive to line staff members—needs to embrace the concept of freely discussing risk on a daily basis

This may seem like a very obvious and simple change. It is not. This is fundamental change in how most organizations operate.

You need to encourage free and open discussion of risks and concerns

How many Status Review meetings have we sat through in which nearly everything has a “Green” status? (Even though “everyone” in the room knows which initiatives are having problems—and often what those “unspoken” problems are.) Too many.

At best this is a waste of meeting time. At worst, it lets risks fester and develop into large-scale problems. This happens because—in most enterprises—too many people are afraid to point out risks, concerns and problems (specifically to the very people who are empowered to help resolve them quickly). As long as this cultural phenomenon is in place, it will be impossible to actively manage risk.

To resolve this you need a new paradigm. I recommend employing both the “carrot and stick” (or what Change Management guru, Kurt Lewin, called “Force Field Analysis”). I use three steps to do this:

  1. Hold regular portfolio reviews in which you review the risks and issues of each initiative
  2. Reward those who raise risks (along with actionable recommendations to address them) with by combining of praise with direct support that helps them resolve their risks
  3. Mark the initiatives of those who do not do this as “Red” and require them to review their projects with you in detail (so you can help them see the risks they are missing).

I apply this at all levels: executive through line staff. It is a constructive approach that uses mentoring and support to drive change. Over time (the time will vary based on the speed of your initiatives), it will create the culture you need to actively manage risk.

You need to be comfortable with what this will expose

Making these changes will fundamentally alter how your organization discusses initiatives and their status. You will initially see almost all of your “All-Green” reports turn “Red.” From the outside, things may look worse in comparison to other organizations. You may even get less-than-desired attention because of this appearance.

This discomfort will be rewarded

Even though things may look worse, the opposite will be true. Your entire organization will be concentrating on preventing problems that could stand in the way of success before they will occur. You will create a much more trusting and open environment.

As a result, you will become more efficient, effective and creative at managing risk. The result of this will be increased level of success in your initiatives and far fewer cost and schedule overruns.

These rewards will become visible externally as well. I have implemented this approach many times, across several industries. Every time it resulted in greater trust and respect for the organization that employed it.

Currently, Mr. Roger Baker (CIO for the US Department of Veterans Affairs) is doing something very similar. It is not an easy process. However, it is earning the department a lot of respect for openness and transparency – and enabling them to focus on providing more effective services for their staff and veteran stakeholders.

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