The 2^nd Principle of Risk: Identify Threats

Identifying and dealing with threats to the organization is a management responsibility.  It’s also a tough one.  We tend to focus on a few notables to the exclusion of many less so.  Which of the many could really hurt?  What can we do without slowing production?

 A structured approach always helps.  Risks tend to sneak in through five windows: Man, Machine, Media, Mission and Management.  Human behavior is implicated in most losses.  Plant and machinery introduce others.  Media includes environmental factors – natural and societal.  Mission includes goals and routine operational tasks. Finally, management risks include planning, org structure, policies and directions.  We’ll need to look at each.

5 Thoughts that can easily provoke a Loss:

1. That (loss) isn’t going to happen around here. (Invulnerability).
2. We know how to handle risk around here. (Machismo)
3. No one is going to tell us how to manage our risks. (Anti-authority)
4. What will be, will be. (Fatalism)
5. No problem – we can do that right away. (Impulsivity)  

As soon as we catch ourselves or an employee thinking these thoughts, watch out!  

Danger from a human source is lurking at our door.

The Power of Scenarios

 Once we’ve identified those threats, we’ll need to understand the degree to which they will interfere with our goals.  Scenarios are an ideal device that can accomplish many tasks at once: they are predictive, instructive, preventive, stimulative and communicative.  Nothing fancy, just a short description of how the risk could penetrate our defenses, cause a loss and frustrate our goals. 

 Managers are often amazed to find out what really happens in the organization they thought they knew so well.  Staff find scenarios therapeutic - provided management takes them seriously. Neither will look at risks the same way again.  It’s like wearing reading glasses for the first time.  Latent conditions that were ripe for disaster can now be seen in time.  

That can’t happen here!  Whoa!  Re-read those 5 thoughts above and think about the lessons of history.  We’ll discuss risk psychology in a later newsletter.

Next month, we’ll look at how scenarios provoke the countermeasures that greatly decrease your exposure to loss, often with minimal investment. 

Recommended Reading for Risk Managers

 Scenarios: The Art of Strategic Conversation by Kees van der Heijden.  

This professor and former corporate strategic planner shows how scenarios can be the basis for thinking, communicating and action in modern organizations.  It is the 2nd of 3 books on the topic: Peter Schwartz’s The Art of the Long View and Gill Ringland’s Scenario Planning.   

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