Why you need to change the way you approach risk

 

When someone raises the topic of risk, do you roll your eyes or become uncomfortable? Many people do and understandably so, as there are responsibilities associated to risk and often significant consequences when getting it wrong.

Which is why we feel the need to take control, to protect what we deem important. Risk after all is defined as the “effect of uncertainty on objectives” and risk management as the “coordinated activities to direct and control an organisation with regard to risk”.

What makes managing risk difficult is the compounding factors, like the heavy influence of third-party expectations, the market, legal and regulatory requirements. Some organisations find themselves distracted by risk. They have lost sight of their main goals, as they have become obsessed with risk assessment and risk management. And with the best of intentions, efforts to manage risk impede their employee’s ability to do their fundamental roles.

Time for a rethink

It’s time to rethink how we approach managing risk. First, ask yourself a few important questions:

  1. Who is responsible for risk management in your organisation?
  2. How does your current approach affect your employees?
  3. Is there conflict between how you promote your organisational culture and your risk management approach?

Let me provide some thoughts and insights, starting with question one.

The Royal Commission’s findings within the Finance Services sector highlighted that accountability resides at the top. It is senior executives that are accountable for the poor behaviour, decisions, and actions/inactions of their employees and the systems within their organisation.

Senior executives are accountable, but they push down the responsibility as the plan moves from the original handful of decision makers into the business. Managers may play a part, but the real responsibility, the execution and day-to-day management of risk, is by your people.

Which leads us to exploring question two.

Your organisation’s risk management approach affects your employees, as they touch every aspect of your business; from daily operations, engaging with customers, utilising technology, creating and adhering to your processes and policies, through to making decisions and taking action (or inaction) that affects your business daily.

Your risk management approach must support your employee’s ability to perform their functions.  If your measures impede employees, they can become frustrated, and even become creative to find work arounds to complete their work, leaving your business exposed.

Leading to question three.

Many organisations promote their culture as a point of difference to the market, prospective employees and current employees. Their aim is to portray a favourable image, for example promoting trust, empowerment, inclusiveness. The issue is when reality conflicts with what is being promoted, the work environment is not as promised. This can do harm to employees and expose the organisation to disengaged or disgruntled workers.

Employees are often drawn to organisations with similar beliefs and values as themselves. Alignment to values is important for employees because it gives them a reason to show up every day and creates connections between the employee and their organisation.

A change in perspective is needed

By engaging and connecting with your people, the right way, you can empower your people to be your organisation’s greatest risk management asset.

People naturally become aware of threats to the things that are important to them, often instinctively. Their desire to protect what is important can also apply to your organisation. Engaged employees want to protect the well-being of their organisation and colleagues. This desire to protect can provide the opportunity for employees to become human risk sensors – proactively sensing risk.

If your people are not engaged, they might see a potential threat and think it is someone else’s problem. But if they are engaged, they are far more likely to come to you and raise their concern that something in not quite right. These conversations can sound out areas of potential harm and are among the most effective ways to reduce organisational risk, if captured and responded to appropriately.

People are at the centre of all risk; it is their decisions, actions/inactions and ability to touch every aspect of your organisation that can determine the potential value or harm that they can bring. It is only by focusing on risk with, through and by your people can you truly solve your risk exposure.

Lisa Sisson, author of ‘Risk Starts And Ends With People: Demystifying risk for executives and leaders’, is a sought-after speaker, mentor, consultant and author who helps executives and leaders who have become distracted and overwhelmed with ‘managing risk’, by demystifying and tackling risk within their organisation. To learn more, visit www.unearth.com.au