Who ever thought risk was optional?
Tuesday, 4 January, 2011 4 Comments
I can’t help but observe the recurring theme of RM having to justify itself in the face of other (financial or operational) considerations. It’s like there is almost an acceptance of the need to “sell RM” within an organisation!!! This won’t be news to experienced Practitioners – some of whose professional persistence has proven pretty costly – but is this not a damning indictment of the prevailing Corporate culture?
Since the phrase “Black Swans” was first coined in the context of the Financial Sector, even when they don’t understand what it means(!), it has served as a ready, C-level, excuse for failure but, it is rarely the case…
Black Swans: A Corporate Governance “blind spot”
Where are the “risk leaders”? Instead of FS compounding the problems we should be utilising our expertise and resources to establish a means of “repaying” society, by promoting, supporting and investing in building community resilience.
EVERY project, process, task, operation being undertaken by an organisation is reliant upon varying degrees of INTER-CONNECTED function. Each contains some degree of risk.
The more complex the process or product the greater the exposure. Risk does not “run parallel” to the function, it is inherent to it and, as such, RM cannot be viewed as an option or add-on! To me this (scarily common) approach serves to reinforce the need for a paradigm shift in Corporate culture.
OK so I have an “axe to grind” but only because my dissatisfaction (disgust) with such scenarios took me on a journey of discovery that has led me to Complex Systems Management or Quantitative Complexity Management (QCM).
The FS industry is as culpable (perhaps moreso) as major Corporations of being accepting of scenarios of RM compromise…as long as it is “dressed up” as “balancing the risks”.
Why?
Too many reasons but amongst them: Results before Strategy; Income before Profitability.
Too much S&M is bad for your long-term wealth
Sales and marketing NOT science and maths.
RM roles and consultancy industry have flourished but that does not necessarily mean that the input is any more objective…unless it is ALLOWED to be so! Too often, being seen as additional, supplementary, somehow optional. WRONG, WRONG, WRONG! Admittedly things may have improved over the years but, please correct me if I am wrong (on any point), there is still a long way to go?
SO why QCM? Because it makes more sense to assess how robust something is than to attempt to predict events in uncertain and turbulent times.
It makes sense to ensure that the underlying structure is robust before burdening it with more processes!? Otherwise risk management is akin to building on sand!
We recognise and rate the interdependencies (the business ecosystem or network, incl. supply chain, if required) without relying upon “risk modelling” or incomplete data e.g. line of business, with only limited relevance to the entity at risk. We process only “pure” system data, map/rate the various interdependencies for complexity and robustness so that the focus remains upon the objective.
Better decisions or better outcomes?
Our “inside to out” [i2o] approach maintains the focus upon what is required for the benefit of the stability of the business system. NOT what satisfies a “top down” agenda or, indeed, a “bottom up” perspective”. Quantitative, verifiable, decision-making (even real time monitoring for crisis anticipation – ideal for critical or “high risk” processes) so “balance” is assured…and compromise is avoided.
About David G Wilson
Excellent piece David … James
Thanks James.
Without turning this into some kind of forum for mutual appreciation I thought your piece (CEO=Ceiling of Extreme Opacity?) was superb and NOT just for the title!
All the best,
David
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I would love to reply but have no languages other than English…with an accent!