27 Feb 2020

Are you overlooking opportunities when managing risks?

Thriving organisations combine managing threats and opportunities. 

Too often (as we see in news headlines) managing risks is seen as just reacting to threats. Indeed, many organisations think finding and dealing with business threats is all there is to risk management. 

This is not right. 

In exploring the uncertainties for your business, you need to look for opportunities too. 

Managing uncertainties well can help you meet your objectives, reach them sooner, or help you exceed objectives (maybe with less work). 

For example, an objective of the NZ Transport Agency is making roads safer so there are less accidents. So, when designing (or redesigning) roads the agency expects consideration be given to designs which may achieve this. These designs do not guarantee less accidents. People still make mistakes, drive drunk, or drive unsafe vehicles, so no amount of good road design will stop that. That does not stop the NZTA thinking about designs which reduce the likelihood of accidents. 

Two things are needed – effective tools to identify opportunities, and a risk measurement scale which you can use to work out if putting effort into opportunities is worthwhile. 

Identifying opportunities requires systematic thinking and suspending judgment. Don’t say “that will never work” immediately an idea is proposed. So, techniques like brainstorming can be helpful. 

Ideas borrowed from another field can also help. We use a modified version of a technique called HAZOP, which originated in the chemical industry, to help with generating ideas. HAZOP is based on HAZard and OPerability. We prefer to think about this as HAZard and OPportunity. 

A recent post by Daniel Burrus at Burrus Research points to a third possibility. He talks about ‘the law of opposites’ as a useful guide to identifying opportunities. You can read more about this here

The next question is: ‘how do you decide if an opportunity is worth effort to bring it about?’ 

We advocate completing your risk assessment tools to incorporate opportunities.  The scale used for analysis (sometimes called an upside-down arrow scale) should enable evaluation of threats and opportunities. The other key part is a set of decision guidelines so, remember to include a decision-making guide in your risk management tools. 

For opportunities, this will include if and how much action should be taken to realise the opportunity and at what level in the organisation the decision to take action (or not) should be made. 

We strongly recommend that your organisation explores both threats and opportunities when managing risk, and makes sure this information is used for all your organisation’s critical decision making. 

 

Mary
Author

Steve Vaughan

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