How can you balance risk management with driving results?

💡In my opinion, understanding your risk appetite is the essential foundation for balancing risk management with driving results. 🎯Risk appetite is an organization's willingness to take risks to achieve its goals, shaped by factors like industry, size, culture, and finances. ⚖️Defining and communicating risk appetite creates a balanced decision-making framework, avoiding excessive caution or recklessness. 📈A clear risk appetite empowers teams to take calculated risks, fostering innovation and entrepreneurship. 📌Managing risk appetite achieves a balance between risk management and results, ensuring a delicate equilibrium.

Through a simple exercise of 2x2 ie risk, benefit analysis obviously in an environment where people feel free and safe to speak up/share inputs. It would help identify which risks can be "calculated" as worth taking...

It’s all about your TEAM! With Risk management it’s education, training and communication. But let’s speak about the type of communication as with Risk management this communication should be one on one and not a “conference call”. Your team also is your first line of communication to let everyone aware of risk issues that may be a culpability issue. A stellar investigation process isn’t a bad idea either!

CFOs wear many hats. One of the top jobs is to help create stakeholder value through pragmatic risk taking. Innovation is, by it's nature, a risky undertaking. It's an investment in an asset that you trust will provide a return. Be it a capital asset or a human asset. The human asset may be developing intellectual property or it may be the creation or expansion of the salesforce. Both of these undertakings can add value to the company that shows up through superior earnings relative to its asset class. In order to get to that point the investment should go through a stress test. What are the likely returns under base, best and worse case scenarios? As a management team, what can we do to mitigate the worst case and multiply the best case?

Here are some strategies to achieve this balance: 1. Identify and prioritize risks. 2. Establish a risk management framework. 3. Set clear goals and objectives: Clearly define the company's goals and objectives, and ensure that they align with the overall risk appetite of the organization. 4. Develop a risk management plan. 5. Monitor and review progress. 6. Communicate effectively: Transparent communication about both risks and results is crucial for maintaining trust with stakeholders, including employees, customers, investors, and regulators. By integrating these strategies into the company's operations, leaders can effectively balance risk management with driving results, ultimately leading to sustainable growth and success.

Risk management is essentially to ensure there is no accidental derailment in the drive to attainment of proposed results. It is a balancing act that requires continuous monitoring of input metrics and calibrating adjustments. It’s a cost benefit analysis for ongoing actions

The balance here falls in the strategic approach. With clearly defined objectives and an understanding of the potential risks, will allow good decision making. Utilising a potential risk assessment framework to evaluate and prioritise risks, based on impact and probability seems sensible. I would suggest using data is also sensible as it drives fact based decision-making. The ability to pivot, flex and scale in changing circumstances whilst reviewing at each milestone, will stand you well to a successful outcome.

Numbers! Probability vs impact (gain/loss) for multiple scenarios and run a scenario analysis. Once this is clear, we put the decision against the strategic objectives of the company and assess vs the general risk appetite. I also believe in testing small and fast. Can we break down the decision into digestible bites? Can we test in a controlled or limited exposure environment?

The relatively low administrative and monetary costs to ensure risk is eliminated and, or properly managed depending upon the risk environment does not warrant corner-cutting regardless of performance requirements. Generally, great risk management ensures consistency in achieving exemplary results. This is especially the case when the organization is expected to operate responsibly as a publicly listed firm or on behalf of private investors' monies with routine regulatory oversight. If your team(s) and organization at-large is routinely impeded in ensuring risk is appropriately addressed and satisfactorily resolved at the expense of performance, the relevant processes must be immediately reviewed or else minor errors could be compounded.

It is necessary to use an integrated approach to risk analysis and the results obtained. You must always evaluate the likelihood of damage from a particular hazard and weigh it against the potential income.

Be planned and prepared beforehand to reduce the impact of risk so that it comes into your control. There are various ways to be efficient while dealing with it. Keep track of them consistently and adjust if the situation demands.

What I have found over the years is 1. What is the threshold? Each organization is different by way of culture and it's DNA and that defines the risk threshold. Do we have parameters that define and try to give structure to that? 2. Is it an activity to be done or is it embedded in the culture? If it's another activity which shows some activity based on some rulebook, it's better not done for thebsake of checklist, but if it's the way of life without burdening someone with some checklist, that will yield the outcome. Now some may find points 1 and 2 contradictory, but they are not. If it's in the DNA, people would do without realising it and follow the outcome based metrics.

Risk controls provide the foundation to Enterprise Risk Management for which a regular review and monitoring is the key. Self assessment and identification of risks involved in each process by the process owners can help in building a sound risk culture. This process of designing, validating, and testing the effectiveness of controls can help in reducing or eliminating the likelihood of risks.

Be incredibly educated with facts and various scenarios of outcome and then "TEST" to validate so as to not tip the company over! Determine the level of risk you believe you can live with and don't proceed beyond that level until your "testing processes" provides you with a "green light" go ahead.

How Good Is The Team, No Really, How Good… It's critical to customize procedures based on the skills, background, and past performances of the team. 1. Personalize Risk Assessments: Adapt your risk assessments to the experience and skill levels of the team to be more effective in managing and identifying risks. Please don't allow your confidence to override their past performance. 2. Delegate Tasks Appropriately: Provide the team with tools, direction, or training to improve their risk management skills. 3. Establish Realistic Risk Controls: Determine risk limits consistent with the group's historical performance and strong points to guarantee that the controls are manageable to their capabilities.

In my experience, integrating risk management into the decision-making process and viewing it as an integral part of achieving results, helps companies strike a balance that promotes innovation and success while minimizing adverse impacts. Data-Driven Decision-Making: Use data and analytics to inform decisions. This helps in understanding potential risks and predicting outcomes, allowing for more informed choices. Agile Approach: Embrace an agile mindset that allows for flexibility & quick adjustments. This helps in responding to unforeseen challenges while still driving towards desired results. Continuous Monitoring: Regularly monitor and reassess risks & performance. This ensures that risk management strategies remain effective.

One of the critical factors I see with businesses who have an elevated risk threat is with their SOP's. They are either being ignored due to poor training, lack of SOP's, time and productivity issues, or pure greed. Sometimes there will be occasions where you have a situation you did not anticipate and there are no protocols in place, those who survive this will have fostered a no blame culture where employees are rewarded for spotting threats and acting on them rather than ignoring them through fear of retribution. SOP's also require monitoring and reporting, there needs be an effective feedback loop in real time either through direct communication or dashboard reporting.

You will fall several times but the biggest failure is when you stop learning from all your failures altogether. Not all your mistakes will be in your control. You need to learn from them and see where you went wrong to avoid similar issues later. When you truly start reflecting, you start learning properly.

As The Saying Goes 'Fool me once, shame on you; fool me twice, shame on me.' Risks and failures are inevitable, but it's important to learn from these experiences. Improving risk management techniques requires learning from past mistakes and being willing to make new ones. Accepting this proverb serves as a helpful reminder that while it is reasonable to be duped or take risks once, it is unacceptable to allow such incidents to recur without taking active steps to learn from them. This is where accountability and proactive learning come into play. We can actively prevent making the same mistakes again and strengthen our resilience and readiness for new challenges by implementing this mindset into our risk management strategy.

One thing I have found helpful is to apply the sandbox method of start up testing when mistakes are made. This also ensures a no-blame culture which encourages employees to openly share concerns. The sandbox assumes you may have control over one or more parts of a test, so as you test and fail you iterate until you land on a more concrete control. Once that control is tested you can then use that in the mainstream though you still keep testing in the sandbox to see if you can beat / improve the control. The purpose of this in risk management is that you are in a continuous improvement loop and avoid complacency especially when the market is with you and SOP's can be stretched.

Very important cycle of actions. Commence; monitor; analyze results; evaluate feedback; implement corrections; monitor; analyze results

Just like information security is everyone's responsibility, risk reporting and being risk aware is everyone's responsibility as well. But when it's everyone's responsibility, often it becomes someone else's responsibility. It's hence important to make the culture open, thereby making people to take cognizance of situation, and from situational awareness comes the hygiene that it's my ownership, just like anybody else's when it comes to risk reporting; as well as making efforts for risk mitigation. That feeling of "I must be involved", "I must do it right" and "I must do it right now" often helps creating and fostering risk aware culture. Training sessions, awareness mailers are important, but nothing beats the feeling of being involved.

Meiner Ansicht nach ist eine gute Fehlerkultur essenzieller Bestandteil einer guten Risikokultur. Nur wenn es möglich ist, offen und ohne Sanktionierung über Fehler zu sprechen, wird eine Organisation nahezu alle Risiken erfassen können und vorallem wird es zu einer besseren Akzeptanz und Unterstützung für risikomitigierende Maßnahmen führen.

The Bigger, The Risk...The Smaller The Reward “The bigger the risk, the bigger the reward"—"the smaller the risk, the smaller the reward." Effective risk management requires a shared commitment from the entire business rather than the exclusive responsibility of one person. Enforce this commitment and understanding. It is essential to promote a risk-aware culture that values cooperation and creativity. Giving team members the freedom to recognize, communicate, and take measured risks creates a climate that is conducive to innovation and may result in favorable outcomes. Acknowledging and rewarding effective risk management techniques and behaviors fosters proactive risk-taking and strengthens an accountability culture.

When the business is new, the risk appetite is great to encourage your sales staff to push hard and create rapid growth. Once the growth happens,at some point the appetite for risk lowers because your revenue stream allows you to say "no" to some deals

Diverse teams are better able to identify and manage risks. Different backgrounds, experiences and training reduce the blind spots if any organisation.

There is a well known story about Richard Branson when he talks about evaluating new ventures. The first comment is that new business opportunities come along like London buses, there is always another one round the corner so don't worry about missing out. The second one is that the better the deal looks the more his team pull it apart as there will be weaknesses in every deal and risk in every deal. When you get hooked into what looks like a no brainer, an emotionally strong deal, then your risk threat increases as you are more likely to ignore the signs as the reward is so strong.

It's like balancing a narrow line regarding risk management and results-driven tactics. One must be cautious and willing to take calculated risks to reach this balance. Bruce Lee, "Empty your mind. Be formless, shapeless, like water. You put water into a cup; it becomes the cup. You put water into a bottle; it becomes the bottle. You put it in a teapot; it becomes the teapot. Water can flow, or it can crash. Be water, my friend." Requiring a balancing act between ambition and caution, where it becomes essential to recognize risks and turn them into opportunities. Executives can achieve outcomes while protecting their company's interests and strategic goals implementing risk, leveraging innovation, and creating a reward measured culture.

My lessons as a practitioner have been to take a balanced approach. Manage risks diligently but don't let it make you so cautious that you miss out on opportunities. Focus on the upside of risk-taking. Don't just see the downside. Assess potential rewards and how they align with goals. Have contingency plans in place in case risks materialize. Be ready to mitigate damage if things go wrong. Celebrate failures as learning opportunities, not just successes. This promotes intelligent risk-taking. Foster a culture that doesn't punish reasonable risks. You want people taking risks, not avoiding them.