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Risky Business

Optimize Blog - August 17, 2012 - 0 comments

Some people just don’t get a lot of luck. Take for instance the Norwegian driver who, whilst making his way along a country road late one night recently, was confronted by the sight of a moose. By taking evasive action he managed to avoid the startled animal but before he could congratulate himself on his driving skills, he ran headlong into a bear that was minding its own business nearby.
Fortunately the driver escaped uninjured but the same couldn’t be said for his car or for the unfortunate bear. The bear ran off into the forest but traces of blood found by the authorities suggest that the poor animal could have extensive injuries.
Rather a unique accident then and unlikely to be repeated so we could forgive the motorist for not expecting to face such a challenge. However, Norway’s mountains are full of wildlife. The country is home to just five million people but has around 100,000 moose and 150 brown bears and so meeting wildlife on the road is perhaps not unexpected.
When weighing up the chance of such an accident happening or being repeated we were reminded of the frequent work we do around risk management.
Regular Zeitgeist readers will be aware of our views on risk management as a key accountability of modern business leaders. However, it doesn’t hurt to reinforce some of the messages and to remind us that managing risk is a leadership core competence – it is the leader’s responsibility to manage risk effectively.
How do business leaders achieve effective risk management? We believe they do three simple things well. First, they ask the right questions. By doing so a leader learns the underlying assumptions being made in assessing and trying to mitigate risk.
Leaders who ask the hard questions discover soon enough that if something seems too good to be true, it usually is.
Second, the best leaders consult with a mix of people, with different perspectives, backgrounds and knowledge to predict, assess and manage or mitigate the risk. They consult with others not only within their own immediate spheres of influence but in other industries and sectors. By not taking a broad perspective there will be a lack of critical testing of ideas or assumptions and their potential consequences.
Third, the most effective leaders are people who act with integrity. They make sure that any decision they make or any action taken by their organization or function would ultimately be good for their company, their employees, shareholders and customers. Overall, the effective leader needs to consistently exhibit an unrelenting determination to contribute to the good of the organization they work for, the people who follow them and the communities in which they operate.
In summary, policies and procedures for predicting, evaluating and managing risk are important. But if leaders don’t ask the right questions, if they don’t seek out a diversity of opinions and perspectives, and if they don’t act with integrity, these rules won’t make any difference. And when that happens, the blame for the damaging consequences rests solely with the leadership.

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