Recently I have been pondering a lot of my old posts and allowing them to reappear in my thinking. Essentially, I just wanted to take some time to rethink what is the “innovation of risk”? Have I answered that question? Not exactly. Instead, at this point, I have thought that the key fact about risk is this – risk is old and stale.
You heard it here first. Risk has not evolved, instead it has regressed into a sad, pathetic beast that focuses on “why you shouldn’t” and not on “why you should”. Risk is not about the past, risk is about the future. It is about being at the fore front of new technologies, new ideas and new thinking.
Don’t get me wrong, I appreciate the GFC (Global Financial Crisis) for what it is. Rich people wanting to get richer without truly considering the broader implications. But get this. It had nothing to do with risk. It had everything to do with greed. Seriously, we are all kidding ourselves if we believe that everyone didn’t know what was happening and the risks being taken. Essentially, if we believe how hidden the debt deferral was, then I can not for the life of me see how anyone who is a CEO driving anything than a sad, crappy lemon of a car. You have to be a complete “sap” to buy a car like that! So we are all expected to believe these rationale, well educated and well versed people did just that! So, let’s move past the labelling of the GFC and the deep analysis of it, and lets get back to reality.
Risk is about innovation. The critical role of risk is not about making management understand their risks, and make better decisions. In the words of John McEnroe, “You cannot be serious!”. If these senior leaders, CEOs, Executives, and managers need someone to help them understand their risks, ensure they have controls over their risks, and then monitor them, then this world is headed for disaster. I am talking biblical proportion disaster. Hell on earth and all that jazz.
These senior executives manage risks in their own lives. They don’t walk into the office and suddenly forget what risk is! So, am I saying forget the basics and essentials? Risk frameworks and all that boring stuff?
Quite the opposite. I am saying that is a ticket to the game. If they are not doing that then time will find them out, and they will fail. Risk Managements role is not to sit idly by watching humans fail. That is not the right thing to do. So, Risk Managements role in the basics is simple. Show them the tool and the framework and then call out when you see any gaps. To me, this is 20 – 25% of a Risk Managers time and effort.
So, what about the other 75%. If you are a senior leader in Risk Management, then leadership takes up around 40-50% of the remaining time. The innovationofrisk.com contains other postings on leadership which we encourage you to read. For the moment we will take it you have read these, or other leadership books and articles, and move to the purpose of this post.
The remaining time, anywhere from 25% to 75% depending on your role is innovation. Innovation across many aspects. Risk needs to innovate in how it obtains, analyses and disseminates information regarding the past, present and the future. Innovation in this space ranges from utilising external data to determine emerging threats, opportunities and markets. It then moves to utilising analysis tools that enable multiple scenarios to be considered and stress tested. And then finally to presenting that information in a thought provoking and truly empowering way, such as using things as infographics.
Beyond this, risk needs to innovate the very practice of risk management. Risk management should no longer be seen as a simple framework of identify, assess, control and monitor. Risk needs to rethink this paradigm as it is too slow and cumbersome. Human beings also lose focus and cannot handle so many risks to manage. Risk needs to consider this and innovate the very foundations of risk management. Find new and unique ways to understand risks and what they mean. Techniques like six sigma and kaizen should be tools of risk, not something outside of risk.
For me the true innovation of risk, is not about just doing what we do today better, but doing it completely differently.
So, do I have the answer? If I did I would share it, but I am working on exactly this as we speak.
For me, the innovation of risk is not an option.