Handling Risk More Effectively
We often here the phrase be proactive, not reactive when it comes to handling risk. However, seldom are we given succinct points on just how to have a more proactive approach. To be more proactive, we must always have three elements under control. These are
1.Confronting the risk
Too many CEOS bury their heads in the sand thinking that ignoring a risk will make it go away. What might have happened if Queen Elizabeth 1st (1533-1603), had ignored warnings about the Spanish Armada? Rather, the smaller British ships met the huge Spanish Armada head on, conquered them and England went on to become the dominant world power for years to come.
2.Preparing to handle risk
Understanding and acquiring knowledge of a risk greatly enhances our ability to prepare for risk. Both of these activities can be helpful in deciding what actions to take. There are two types of action. One is protection. Protection comes in the form of diminishing the possibility and the size of any loss that might occur from a risk. An example of this would be good economic forecasting. This is especially helpful in times such as the recession we just experienced. Therefore, it is imperative to stay ahead of the game by being in tune with changing economic conditions and the consequences those changes might bring.
3.Coping with the consequences
It stands to reason that the better the preparation the less the consequences. Unfortunately, we all know that incidences will and do occur and that we must deal with the aftermath.
- Communication is essential. For example, after a violent workplace incident, people are anxious about what might happen next and to understand what extra security and preventive measures will be put in place. Another example is the bribery debacle at Siemens. A video by the new CEO of Siemens expresses his dedication to ending corruption and assuring all stakeholders that he will not tolerate this type of behavior under his watch. In the video, he goes on to suggest that the company is still secure and would remain that way.
b. Discussion groups allow employees the opportunity to express fears and concerns. They may even offer solutions on how they may contribute to the recovery process.
c. Acquiring insurance may be seen as too little too late. However, this is the time to take advantage of everyone’s heightened awareness of risk and establishing preventive measures for the future. Check your resources and any that are in poor condition should be put in proper operating order. This is a good point to establish safety committees, polices, procedures and processes that might at least lessen the next blow.
No, Virginia, there is no way to predict or prevent every crisis or bad risk in business or life. Alternatively, standing around with our hands in our pockets or our heads in the sand is only inviting trouble and feeds knee jerk and reactive approaches to handling risk. These rarely work. Heeding the above points allows for a more proactive and effective approach to handling risks.
Graphic Credit: Big Stock.com