Aug 12, 2018
In this episode I outline a method of turning risk completely on its head that I developed which gets killer outcomes for everyone involved.
When most of us here the word Risk Management Plan we start thinking red tape, no more freedom and a group of expensive auditors at your door to analyse your business inside out.
If you’ve ever had the risk auditors turn up and trawl through your business telling you all the things you need to write a report on about you’ll stop major events happening you’ll know the meaning of paperwork.
Richard Branson. Never made a deal he could lose on.
“As an adventurer...I try to protect against the downside. I make sure I have covered as many eventualities as I can. In the end, you have to take calculated risks; otherwise you're going to sit in mothballs all day and do nothing.”
Throughout my business life I have always tried to keep on top of costs and protect the downside risk as much possible. The Virgin Group has survived only because we have always kept tight control of our cash. But, likewise, I also know that sometimes it is essential to break these rules and spend lavishly.
Richard Branson
Don’t get me wrong, there is always a time and place for risk management plans. But they have a serious problem. Ask yourself a questions, when was the last time you got out your Risk Management Plan and assessed every aspect in detail?
The major problem with risk management plans is that they don’t get big buy-in.
In a business sense risk has a bad wrap. It defensive and often negative. And here is the MAJOR reason why.
It is all about stopping things happening. Stopping sucks the energy out of a room. It’s not motivating. It doesn’t draw people up to their best performance.
What I do with clients is flip it on it’s head.
How does risk assessment traditionally work:
Risk is generally assessed against the impact and likelihood of bad event happening. It is at this point that it gets put into a matrix, given a code and then managed through a risk management plan.
This is where the psychology of high performance disagrees with this approach. The process loses focus on the outcome. Instead it sends people into the minute details of defence rather than that key steps to a positive and bigger outcome.
To spin it on it’s head what we do is put a new event up. E.g.
- Zero Safety Incidents
- Successful $100M Business Deal Announced to Market
- Perfect Implementation of new business system
At this point we plot, the outcome on the traditional risk matrix. I.e. What is the current likelihood of the outcome happening and what is the size of the impact?
Now we optimise the hell out of it. Drive it up by increasing the likelihood and increasing the impact. What you’ll find is that people now are shoring up their plans with positive actions that are energising. What’s more you’ll note that the likelihood of failure also plummets.
What this means is you start to take calculated risks and have done everything you can to increase the likelihood of success.
YOUR PROCESS OF OPTIMISING RISK
- Define the outcome
- Plot it on a matrix with the likelihood of success and positive impact on the business
- Record all your assumptions
- Partnerships
- Resourcing
- Budget
- Relationships with key stakeholders
- Plan how you can increase likelihood and impact through:
Chief, what I recommend you do then is flip it back on its head and do the traditional method to give it a different lens. And then return this method.
Stay epic
I’ve put all the show notes on the website at www.chiefmaker.com.au/63