June’s Innovation Research Group saw two industry experts, Mark Baker (Head of Risk and Assurance at Pentland Brands) and Mike Lauder (consultant), share their new research on how to improve the quality of risk management.
The duo outlined their new governance framework and in the cross-industry discussions that followed, these four key points emerged:
· Whilst we should still learn from hindsight, the focus must be on applying foresight. Use techniques such as open system planning to look ahead critically at what might impede goals. Existing risk paradigms should be replaced to reflect this.
· Promote risk discourse. That is, executives asking themselves and others key questions. For instance, communication failures – are the organisation’s structure and processes preventing the delivery of critical pieces of data? Similarly, are we allowing for issues such as politics of estimation? Indeed, some people’s job security and bonuses are tied to revenue generation and, as a result, these employees have a strong incentive to provide over-optimistic estimates of what can reasonably be delivered on projects
· Use the ‘lines, circles and dots’ paradigms to better address the risks your company / project may face. ‘Lines’ are linear processes: they look forward to favourable outcomes and are based on combinations of new and routine activities (e.g. managing a project). Rule-based and experiential judgement is needed to manage ‘line’ issues. ‘Circles’ are repetitive, cyclical processes: like lines, they look forward to favourable outcomes, but require continual monitoring and refinement. ‘Dots’ are one-off, scenario-based events: these processes look backwards from a specific future event to help prevent an unwanted outcome or to understand why it may have occurred. Unfortunately, these can all overlap in any one system
· Risk identification and propensity are influenced by two critical factors – individual perception and experience – meaning all people appraise risks differently. Risk assessment forms, however, can be used to see where employee’s outlooks align
Participants included Associated British Ports, E2V, BTG and Morgan Sindall amongst others.
July’s meeting will focus on the Art of Innovation Leadership, with a presentation from Harvard Business Review contributor and Visiting Fellow to various Universities, Professor Victor Newman. Contact a member of the KnowledgeBrief team to join.
If you would like to know more about this or the programme, please visit KBInnovate
References:
Institute of Risk Management (2014) Lines, Circles or Dots: Which Risk Paradigm Do You Use?
Khatta, R. S. (2008) Risk Management, Global India Publications; Fink, A., Marr, B., Siebe, A., & Kuhle, J-P. (2005) The Future Scorecard: Combining External and Internal Scenarios to Create Strategic Foresight, Management Decision, 43(3), 360-381.