Transcript

You have goals to achieve as individuals, as well as leaders and board members in organisations.

These goals vary from your desire to get home safely after work to the need to meet the corporate sales target.

You cannot predict what will happen along the way. There are uncertainties as to whether you can achieve these goals. These uncertainties lie between where you are now and where you want to go.

Uncertainties that you experience along the way may cause you to arrive home late or to miss your sales target.

Equally, there may be opportunities for you to exceed your goals by arriving home early or even exceeding your sales target.

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Ultimately, you need to understand what might happen along the way, both good and bad, and take appropriate opportunities and actions to be successful.

Quite simply, you are managing your risks all the time, in your daily life and in your work life.

This is called risk management. Risk management is good management especially when we think about the topic of management, which is the coordination and administration of tasks to achieve a goal.

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Risk management is about identifying uncertain events that might occur along the way between where you are now and where you want to go.

After identifying these uncertain events, you assess how these events could affect the achievement of your objectives. Risk arises because of these uncertainties.

 

You are, therefore, not managing the uncertain event itself but managing the consequence of the uncertain event – good or bad.

These uncertain events could either prevent you from being successful or accelerate your success.

Risk management could be referred to as success management or even uncertainty management. Some may say that good risk management is just good management, or even good decision making.

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Let me illustrate with your commute home after work.

You plan your trip and anticipate situations like bad weather and heavy traffic that could delay your road trip home. When these uncertain events do occur, you are ready to act.

Your objective is to arrive home safely after a 30-minute commute. You may allow for a longer commute if it is raining or if it is going to rain.

As you embark on your road trip home, more uncertainties or opportunities may present themselves – erratic drivers, road accidents, road closures, etc.

You are going to keep your eyes and ears alert, monitoring all possible sources of risks as you are driving home.

 

Throughout your road journey home, you monitor your vehicle for signs of potential problems. You tune into the news station for frequent traffic and weather alerts.

Practising defensive driving, you stay well behind the car in front, thinking ahead and anticipating hazards so that you can avoid accidents before they happen.

To allow you the opportunity to travel faster, you are alert to the opportunity to change lanes safely. When you see traffic starting to build up on your regular route, you prepare yourself to take an alternate route home.

You are always thinking about getting home safely in the shortest possible time.

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What I just described is something that you do unconsciously all the time. You consider what might happen and what it might lead to or the consequences of potential uncertainties.

 

You have been unconsciously managing uncertain events or risks and opportunities in your work life without thinking of it as “risk management”.

Risk management is not new. It is not separate or distinct from good management. As a good manager or decision-maker, it is part of what you do naturally without calling it “risk management”.

 

Being a critical part of decision-making, problem-solving and critical thinking, risk management can help you to optimise your performance, seizing opportunities and creating value for others.

Risk management, in short, helps you to become successful.

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Let me illustrate further with another car analogy.

When you get into your car for a road trip, no rational person would begin driving a car believing that the car has faulty brakes.

After all, would you get into a car and drive it if you knew it didn’t have effective brakes?

Assuming that the car has working brakes, it gives you the confidence to accelerate the car without sacrificing control and safety to reach your destination on time. Working brakes help you navigate bends and corners safely at the appropriate speed without crashing your car. They help you stop your car at the lights. Good brakes allow you to ‘beat the lights’ or travel on the fast lane.

You can take big swings at things by having the right controls in place. Like good brakes, risk management helps you go faster to achieve your objectives. It can accelerate your success, rather than preventing you from being successful.

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The ultimate objective of risk management is not about avoiding risk or preventing you from doing the things you like to do. Rather, it is about the ability to take reasonable but informed risks and opportunities to be successful.

Knowing that safeguards are in place to mitigate the likelihood of significant and costly mistakes, by managing the potential consequences of uncertainties along the way, it allows you to “accelerate the car” and get to your desired destination quicker but safely.

Therefore, cars have brakes so that you can go faster and safely towards your destination.

Likewise, organisations have risk management so they can take the appropriate risks or pursue opportunities to achieve their objectives to be successful.

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Without a doubt, being successful involves taking risks and seizing opportunities. If you don’t embrace risk-taking or opportunity seeking, you may not be successful.

Risk management helps you to be successful.

Countless entrepreneurs and business owners have taken risks to get their businesses to where they are now. Taking risks and seizing opportunities, however, does not mean going into business blindly and then expecting great results.

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Therefore, contrary to popular believe, risk management is not about managing specific events or situations. It is not about managing a list of risk, or ‘list management’ as some people would say.

Rather, risk management is about managing the achievement of objectives, taking the appropriate risks, seizing opportunities and being successful. This is success management.

You can only increase the likelihood and extent of your success if you understand what might happen, both good and bad, as you strive to achieve your objectives and be successful.

Risk management identifies what needs to go right, rather than what can go wrong.

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Risk management is also less about avoiding risks. Rather, it is more about making informed intelligent decisions to take risks and seizing opportunities to be successful. It is knowing when and how to apply the appropriate control.

Risk management is not about managing the event or uncertainty itself but managing the consequence of the uncertain event on the outcome that you want to achieve. This is uncertainty management.

 

Far too long, we have been focusing on the process, compliance and tactics of risk management, rather than the purpose and intent of risk management. Over the years, risk management has unfortunately become a compliance tick-the-box exercise of form filling and the generation of long lists of risks that overwhelms people. Corporate executives find no value in the practice of risk management.

It is so easy to get into the trap of focusing on the long list of risks or events without focusing on the consequences of these events on the achievement of your objectives. You can easily get trapped in the details rather than thinking about your success, and what needs to be done to be successful.

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The key strategic focus of risk management, therefore, is on enabling success by making quality informed decisions and taking the right risks when there are uncertainties to the achievement of your objectives. Use risk management to drive your success.

 

The overarching goal of your risk-related activities is to support informed decision-making. This will help you identify and properly assess uncertainties, risks and opportunities to achieve your objectives. It also helps with managing uncertainties.

In short, by proactively managing your uncertainties, risks and opportunities, it can help you become more successful.

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Thanks for watching.

For more videos like this, go to PracticalRiskTraining.com.