Issue Management: Risk Management
Issue Management: Risk Management
Unlike traditional risk management tools, which are usually based around tangible and quantifiable issues, scenario thinking encourages executives to step into the unknown and imagine a range of possible futures. - Doug Randall and Chris Ertel
Managing risk is central to many corporate strategies. Reputations that take decades to build can be ruined in a matter of hours through incidents such as environmental accidents. “The definition of risk management for organizations has broadened, expanding beyond the tangible and quantifiable issues to the less tangible and more qualitative forms of risk. The bounded definition blinds executives to considerable opportunities that come when risk is well anticipated and it causes them to miss potentially major disruptions.”[1]
In order to enhance their position, executives need to integrate their “risk management” and “risk taking” sides – both within themselves and within their organizations. Implementing risk management into their strategy will require them to adapt a new attitude and to take a strategic view of risk which incorporates managing uncertainty. Risk arises when an organization’s operating system is vulnerable due to the absence of effective controls and countermeasures (i.e.; a lack of risk management)
Predictable Surprises
A predictable surprise is defined as “an event or set of events that take an individual or group by surprise, despite prior awareness of all the information necessary to anticipate their consequences.”[2] This is equated to “I might have known this would happen.” Evidence shows that “people tend to believe in retrospect that an event was far more predictable that reality dictates.”
But why do businesses and authorities not act upon what they know to prevent predictable surprises? Bazerman and Watkins have identified five cognitive biases for this question. “First,
Unlike traditional risk management tools, which are usually based around tangible and quantifiable issues, scenario thinking encourages executives to step into the unknown and imagine a range of possible futures. - Doug Randall and Chris Ertel
Managing risk is central to many corporate strategies. Reputations that take decades to build can be ruined in a matter of hours through incidents such as environmental accidents. “The definition of risk management for organizations has broadened, expanding beyond the tangible and quantifiable issues to the less tangible and more qualitative forms of risk. The bounded definition blinds executives to considerable opportunities that come when risk is well anticipated and it causes them to miss potentially major disruptions.”[1]
In order to enhance their position, executives need to integrate their “risk management” and “risk taking” sides – both within themselves and within their organizations. Implementing risk management into their strategy will require them to adapt a new attitude and to take a strategic view of risk which incorporates managing uncertainty. Risk arises when an organization’s operating system is vulnerable due to the absence of effective controls and countermeasures (i.e.; a lack of risk management)
Predictable Surprises
A predictable surprise is defined as “an event or set of events that take an individual or group by surprise, despite prior awareness of all the information necessary to anticipate their consequences.”[2] This is equated to “I might have known this would happen.” Evidence shows that “people tend to believe in retrospect that an event was far more predictable that reality dictates.”
But why do businesses and authorities not act upon what they know to prevent predictable surprises? Bazerman and Watkins have identified five cognitive biases for this question. “First,