“NeverLand” – That’ll Never Happen Here!
How often have your thoughts and ideas on an issue been rebutted by the words of a superior or colleague: “that’ll never happen here”? And all you were attempting to do was to bring to their attention an issue or situation that you believed warranted more consideration – further thought, only to have it summarily dismissed; and you were left wondering why. In situations like this, what many of us fail to appreciate is that what we consider to be reality may not be the reality of others; our superiors or colleagues may have quite different realities to ours. Unbeknown to us, what we are actually doing in such situations, is bringing to their attention something that does not fit into their mental model or framework of the way things work – their reality. And because it does not fit their reality, they summarily dismiss it as irrelevant, seemingly from our perspective, for no rhyme or reason.
This is the dilemma that not only confronts risk management and business continuity professionals, but all those who seek to effect change, and especially those who seek to change the culturally driven beliefs of out-of-touch directors, executives or line-managers, whose group-think driven focus is performance – performance -performance; nothing else matters!
Performance (aka) efficiency is the paramount consideration for those governing and managing our organizations today, the one’s that purport to serve us, but which in reality rule us! As shareholders of these organizations, we demand improved returns and as stakeholders (consumers), we demand ‘more-for-less’; and sometimes, both. You could say that we are all covert Michiavellis!
Furthermore, society keeps on clamouring for more sophisticated products and services, but does not want to pay for them (more-for-less). In short, society (you and me) is ‘Addicted to Performance,’ the consequences of which are many (1). Suffice to say; this addiction traps organizations. They have no alternative but to engage in efficiency-seeking activities.
We are all aware of the exponentially increasing connectedness and interdependence of our globalized and urbanized society, but few appear to appreciate its fragility, that failure at some point time is inevitable, as indeed were the avalanches in Per Bak’s sand pile experiments. This age-old phenomenon of increasing complexity as sophistication increases also has a price tag – resilience. A price tag that as a society, we are for the most part, seemingly reluctant to confront. Indeed, we studiously avoid and are deliberately, and wilfully blind to it. More »»
In Pursuit of Performance
It was not my intention to write this article before – Resiliency – An Impossible Dream?
But events and circumstances conspired and I have now written this one to respond to a question that I have been asking myself for sometime now:
Why is it so difficult to implement sustainable risk management i.e.the management of risk is embedded in organizational culture?
I am not sure that I have the complete answer, but I think I am tracking in the right direction. And neither do I provide a “how-to” answer – more a “what-to-do”?
Success Speaks for Itself!
The consensus view (1) amongst the world’s largest banks was that during the relatively benign economic environment leading up to the 2007 global financial crisis, the risk/reward balance became skewed with many companies focusing upon growth for growth’s sake; risk management being viewed primarily as an analytical function rather than a critical component of decision-making.
In the opinion of many, greed (both organizational and individual) aided and abetted by inappropriate incentive/bonus schemes underpinned this growth for growth’s sake strategy. But, digging deeper into the underlying reasons for this focus takes you to organizational and individual beliefs – assumed (tacit) truths, the matrix of organizational and indeed societal culture. More »»
It’s Just Not That Simple
What’s not “Just that Simple“, what are you on about?
A reasonable question and not one that is easily answered. It’s taken me the order of two years to begin to understand that my internal struggle and discomfort was about trying to reconcile Espoused Theory and Theory in Use in the organizational context. To put it in simpler terms, to reconcile the gap between what I (the organization) say I (we) do versus what I (we) actually do, particularly in the context of managing risk – all aspects of risk and not just financial risk.
This context has been part of my workspace for over a decade and a half, one that has included the creation of organizational management systems (operational risk management, business continuity, compliance, assurance, etc.) for substantial organizations and then attempting (sometimes with little apparent success) to facilitate and mobilize their adoption. In fact, my observation is that operational risk management systems only function for a short period of time before they fall into a state of disrepair, no longer fit-for-purpose.
And when I compare notes with my colleagues, I find that I am not alone, others relate similar experiences and make similar observations. More »»
Liquidity is King!
In a recent survey of the world’s largest banks the top five lessons learned were:
- Liquidity is king (90%);
- Institutionalise a risk culture (73%);
- Stay attuned to industry dynamics (60%);
- Don’t forget the people factor (40%);
- Prepare for the unexpected (35%).
An overwhelming majority (90%) cited an over-reliance on short-term funding, that growth was “king” and that liquidity was just not factored into the equation. Nearly three quarters (73%) of respondents considered it essential to institutionalise a risk culture… that goes beyond a narrow compliance focus. And over half (60%) of the respondents expressed the view that their organisation had been lulled into complacency by the benign market environment and the flow of new product offerings. A view expressed by a significant number (40%) of respondents was their underestimation of the importance of the human factor in managing risk, that human judgement, insight and experience should be more highly valued and utilised. And finally, 35% expressed the view that the banking industry as a whole had adopted a reactive, compliance-driven approach, rather than a forward-looking stance to risk management.
Equally applicable to business, non-profit and government organisations, these lessons bear repeating. They should echo in our ears because I suspect that many organisations have found themselves learning the same lessons! More »»
Hidden Risk – Waiting To Bite
Almost without exception risk registers reflect the potential impact and probability of occurrence of risk events external to the organization; for example the potential impact on enterprise (organizational) performance of a supply chain failure whether goods or services or the impact of increased cost of finance, whatever the cause. Very rare indeed is it for risks consequential to current organizational philosophy-mindset (e.g. we’ve been in the business a long time – we know what we are doing) or governance-management decisions and actions (e.g. cuts to capital and maintenance budgets, freezing of wages and salaries, sinking-lid and no replacement staff employment policies, slashing training budgets, etc.), to find their way onto the enterprise (organizational) risk register, let alone the risk dashboard.
My context here is overall Enterprise (Organizational) Performance Risk Management, not siloed subsets of risk such as financial risk, health & safety risk, operational risk, credit risk, supply chain risk, project risk, etc; the impact of today’s mindsets, decisions and actions upon future organizational performance, however it is measured – in terms of profit, return on investment, program cost or outcomes delivered.
Before rambling on, a quote from G. K. Chesterton who over a century ago with great insight wrote:
The real trouble with this world of ours is not that it is an unreasonable world, or even that it is a reasonable one. The commonest kind of trouble is that it is nearly reasonable, but not quite. Life is not an illogicality; yet it is a trap for logicians. It looks just a little more mathematical than it is; its exactitude is obvious, but its inexactitude is hidden; its wildness lies in wait.
What is hidden by the presumptions that mindset often engenders or the unknown consequences of today’s management decisions and actions?
What lies in wait with a metaphorical bite? More »»