Reduce Risks of Risk-taking

I. A DEFINITION OF RISK

Risk is a value representing the likelihood of some threat occurring and the impact it would have should it occur. Risk exists everywhere we look and increases where ever we do not look for it. Risk can not be eliminated, only mitigated, preferably as part of a comprehensive risk management program.

II. SOURCES OF RISK

• CHANGE (HIGH ENTROPY)

• STATUS QUO (LOW ENTROPY)

• TIME (TREND TOWARD HIGH ENTROPY)

 

Risk does not care if you understand it fully or not. Risk has an active interest in you and it will find a way into your situation awareness.

Nothing remains the same forever. It is an inevitability that minute incremental variations in the environment will eventually mount in volume and frequency, enough to disrupt the historic processes that has balanced the system to date.

It is the nature of Risk to follow this trend toward disorder with of the passage of time. Eternal stasis or pareto equilibrium are transitory, brief or epochal depending solely upon one's frame of reference.

Signaling of change originates in the environment, directed inward or outward or both. Internally, organizations must recognize how profoundly their structure dictates the range of possible viable responses. Options are only partially useful for making decisions without understanding one's risk attitude.

 

III. ASSESSING RISK ATTITUDE

• Appetite for risk

• Tolerance for risk

• Ability to manage risk

 

Every one of these increases with awareness and preparation. A positive risk attitude should provide confidence across all stakeholder groups that the organization is ready for what is coming. It will emerge as a direct result of integrating risk management into strategic and operational planning.

 

 

IV. BALANCING EXPANSION AND PROTECTION

Risk is best confronted head on. Not as a stand-alone cost center. But a component of an operational strategy built to manage the costs of risk alongside that of other costs of goods served.

An operational strategy, aside from revealing hidden risk, will increase efficiencies and profits for the business as the savings of security are off-set by the value of the firm as a by-product. A strategy we advise is to bury risk mitigation into streamlined and customer pleasing experiences. Think of it as guard rails that provide your teams the confidence to move more aggressively, take bigger risk and produce insights and value sooner.

 

VI. GIFTS FROM YOUR FUTURE SELF

Risk management at even the smallest level of organization is not a choice. Deferred risk is a liability to the organization that appreciates at higher rates than the collective business and technical debt it is written off as.  Sound operational foundations have risk management built in. Think strategically, act incrementally, to deliver sooner.