Risk Management

Risk Management

Amanda Setili shares a concise post on the perception of risk and how it affects the team. 

Karen perceives that competitors are moving very quickly, so she feels the leadership team has no option but to be even more aggressive. Jim sees the competitors as foolhardy, so he wants to take a slow and steady path while the competition defeats themselves. Curt keeps waffling back and forth; he wants to pump up revenue growth, but consistently balks at the price tag of every major new initiative.

When team members perceive different types and levels of risk, their organizations often wind up either frozen in place, or making decisions that result in bad outcomes. The differences of opinion can feel irreconcilable.

The smart move is to bring four elements out into the open. Ask each team member to share their…

Key points include:

  • Assessment of the degree of risk
  • Supporting data
  • Mitigation plan

Read the full post, Are Different Perceptions of Risk Weakening Your Team?, on LinkedIn.

 

In this post, Amanda Setili explains why taking risks may be the safest strategy.

The world is always changing, but lately the changes have felt faster and more extreme. In times like these, your ability to manage risk and uncertainty can give you a huge competitive advantage.

To put this another way, in volatile times, taking on too little risk is dangerous. You may be left in the dust as competitors invest in new arenas that you considered too uncertain.

Some of my most successful clients encourage their teams to swing for the fences AND to have a systematic plan to manage risk. They break the risks into distinct pieces and assign someone to manage each specific risk, such as the risk that suppliers will not be able to perform, or the risk that customers won’t understand the product.

They’re also very clear about the risks that they are willing to take that other companies will not. For example, an organization may choose to self-insure, because they better understand the risks they’re taking than insurers do.

To accept more risk in a responsible manner, it pays to break the risk down into smaller pieces. Then, manage each of these pieces. Set clear goals for what you need to learn in order to mitigate each risk.

 

Key points include:

  • The benefit of risk taking
  • Managing risk
  • Risk options

 

Read the full article, In Volatile Times, the Riskiest Strategy Is to Take Too Little Risk, on LinkedIn.

 

 

Davide Gronchi shares an article on risk mitigation that includes his pragmatic method designed to drive out ‘failure-mode and effects analysis’ designed by the U.S. military in the 1940s. 

Whilst in the middle of an heavy and unexpected crisis, company leaders are requested to keep looking far ahead and shape the future of their company by (re-)designing the strategy and how to implement it.

Current times are full of worries and threads, every day are more negative than positive news that capture our attention. How to concentrate on our business, sailing in calm waters and heading to a bright future? Yes, company leaders must keep this attitude! Nobody else can do this, it cannot be delegated. And recent research proves that CEOs like crafting strategy most than other task their are responsible for!

Nevertheless, we are all prone to see risks everywhere now during the COVID-19 crisis. This was a risk that nobody was really ready to mitigate. Nobody actually ever thought it could ever been real!

In our life of leaders, in our companies, many can be the risks that we might face and that need to be considered and need a mitigation plan. How to identify and prioritize risks?

I apply a good pragmatic method that derives out of FMEA. FMEA stands for Failure-Mode-and-Effects-Analysis and was invented by the US military in the late 1940s. I am not going to describe in detail what that is (there is plenty of literature around it), but I want to describe how I use this to prioritize risks. The beauty of this approach, is that it helps to put some objective criteria into an exercise that could else be very theoretical and subjective. FMEA is a semi-quantitative evaluation.

 

Key points include:

  • Severity
  • Occurrence
  • Detection

 

Read the full article, The pragmatic way for Risk Mitigation, on LinkedIn.

 

Umbrex is pleased to welcome Yacine Berdjeghloul with Wolfinance Consulting.  Yacine is a bright Risk professional with a strong academic background and technical experience in modelling & coding. He has a high interest in solving complex issues, is self-motivated and entrepreneurial. He was among the top 5% of his Bachelor’s and in his previous job was presented the GE Award for “Inclusiveness” and “Expertise”. Alongside his technical capability, Yacine is an excellent communicator with a natural ability to establish rapport. Living in the Netherlands, he enjoys nature, movies and spending time with his family. His favourite animal is, you might have guessed, the Wolf. The Wolf is a symbol of guardianship, instinct, loyalty, and spirit.

The Wolf represents strong connection with instincts and intuition, high intelligence and communication – qualities we all should aspire to.

 

Aneta Key shares a short but informative video and the first in a series on the topic of sizing up the situation for strategic decision-making.

Key points include:

  • Speed
  • Severity
  • Uncertainty

Watch the full series, Sizing up the Situation, on AedeaPartners.com. 

 

 

Forbes published an article from Stephen Wunker that explores how we can leverage lessons learned from COVID-19 to develop, improve, and use scenario planning. 

Leading up to 2020, executives were already grappling with rising disruptive technologies, changing business models, and rivals emerging from unexpected places. Throw in a global pandemic, and the future seems about as predictable as a game of Rock, Paper, Scissors with a hundred hands.

While some were poised to respond to the turbulence that coronavirus introduced to business environments, most were not. Traditional approaches to strategic planning have largely been unsuited to COVID times and have left companies vulnerable. So, what are businesses to do in an environment changing so quickly that strategic plans end up getting thrown out the window?

Enter scenario planning, a form of planning that leverages what you don’t know to bring multiple hypothetical futures into view. Scenario planning allows you to:

  • Gain insight into the key drivers of a situation
  • Embrace and control uncertainty
  • Recognize the assumptions your organization has been making
  • Expose your false sense of security

Sound uncomfortable? Good! Scenario planning isn’t new, but it is newly relevant in the age of coronavirus and beyond. Some industries and businesses have already adopted scenario planning for COVID—if you’re in any way connected to a college or university, you’ve likely received an email from the administration detailing the potential options for coming back to campus in the 2020-2021 academic year. Macalester College in St. Paul, Minnesota, for example, distributed a list of six scenarios in early May.

 

Read the full article, Learning From Covid: How To Use Scenario Planning To Prepare For Future Uncertainty on Forbes.com.

 

Umbrex is pleased to welcome Michael Z Guterbock.  Michael worked for a decade in disaster preparedness and global health for the Assistant Secretary of Preparedness and Response (ASPR) and the Centers for Disease Control and Prevention (CDC). Michael currently consults with Booz Allen Hamilton as a country risk manager. Prior to his consulting and government career, Michael worked for the private sector in the international development space. He is pursuing his Doctorate in International Affairs from Johns Hopkin University’s School for Advanced International Studies (SAIS). He co-lives in Washington D.C. and Bologna, Italy with his wife and two young children. Michael is happy to collaborate on projects involving strategic planning, risk assessments, diplomatic engagements, and global health. Michael spans both the U.S. and Western Europe

 

Martin Pergler shares an article that explores risk appetite and how to address it as we move into phase two of COVID-19. 

Act I of COVID response has been about broad societal measures to stop the pandemic from overwhelming the health system, e.g. physical distancing, pausing the economy, cutting travel; all to slow exponential spread. While Act I isn’t over, it’s increasingly clear a long Act II, balancing reopening and personal freedoms with stubbornly continuing COVID risk, will follow. That’s before Act III, a full-fledged recovery (vaccine? antibody tests? herd immunity?…), can truly start.

For Act II, we need to start having clearer, more nuanced, and non-judgmental discussions about risk appetite. This is a concept from (institutional) risk management, specifying* how much of what type of risk an entity is prepared to take, and under what circumstances, including for what benefit. One of the challenges in risk management is reaching consensus on risk appetite, and reflecting that different individuals and groups in the entity may have different risk appetites. This risk appetite concept is also applicable to individual and societal risk-taking, though less often discussed explicitly. In any case, it’s going to be very important for COVID Act II, and we’re already seeing it rear its head, in ugly, unstructured, politicized fashion.

 

Key points covered include:

  • Objectively different personal risk
  • Different personal risk tolerance
  • Lack of rationality
  • Selfishness vs altruism

 

Read the full article, Getting serious on COVID risk appetite, on LinkedIn.

 

 

Vik Muktavaram applies a few principles of risk management to understand why COVID-19 grew from a risk to a pandemic. 

As the federal government finally took the first decisive step in stemming the outbreak of COVID-19 in the US, the images of serpentine lines of arriving international passengers at airports waiting for immigration and screening for COVID-19 coronavirus ubiquitous online and in print. Presumably, the rationale for the screening was that these arriving passengers represented a high-risk cohort. Yet, the long, crowded lines with no social distancing not only defeats the very purpose of screening but in fact, one could argue that the risk of spreading is increased substantially amongst the ground staff as well as passengers from different airlines. 

As we deal with the COVID-19 pandemic, we should also be wondering how did we miss this when all the signs were there. How did some countries such as Singapore and South Korea manage to contain, if not necessarily prevent, the spread of virus in their countries despite their proximity to China? Risk Management is a structured way of looking at early indicators and prioritizing risks and then managing these risks. As our crisis response continues to be a case study in “how not to”, let’s take a step back to see how the risk (low likelihood, high impact) of a virus-pandemic became a crisis. Mind you, this was not a black swan event. Even as early as 2015, Ebola outbreak provided a harbinger of things to come. Before there is a war, there is a failure of diplomacy, before there is a bankruptcy, there are telltale signs of declining sales, before COVID-19 became a pandemic there was Wuhan and there were several emerging risk indicators.

 

Points covered in this article include:

  • Risk transfer
  • Risk acceptance
  • Risk avoidance
  • Risk mitigation

 

Read the full article, COVID-19 pandemic – How a risk became a crisis in the US, on the Rithym Advisors website. 

 

 

When Kaihan Krippendorff found his calendar clear due to COVID-19 cancellations, he, in collaboration with his team, decided to launch the Reimagine the Future summit. This article is a summary of all 47 sessions, reviewed recordings, and in-depth content analysis of the session transcriptions and audience dialogue from today’s most influential business thinkers who took part in the summit.   

In March, as the reality of COVID-19 started taking hold, when my team received our fifth request in one day to postpone a keynote speech and my calendar was suddenly, unexpectedly, free for months, we sat down to discuss what to do. We figured that (a) other business thought-leaders are similarly, suddenly free and (b) many are wondering what would happen to the business they own or work.

So, we decided to link supply with demand and launch a series of virtual summits connecting today’s most influential business thinkers with the practitioners (strategists, executives, and entrepreneurs) who could apply the business thinkers’ insights to create a better future … with 100% of profits donated to COVID-19 charities. We called it the Reimagine the Future summit.

The response exceeded our hopes. Immediately, many of today’s foremost business thinkers signed up including Paul Krugman (Nobel Prize-winning economist), Renee Mauborgne (creator of Blue Ocean Strategy and ranked the #1 business thinker in the world), Rita McGrath (ranked the #1 innovation thinker in the world), and Liz Wiseman (ranked the #1 leadership thinker in the world). In all, 47 of the most influential management thinkers today agreed to speak. We attracted over 5,000 “Outthinkers” (innovators, executives, entrepreneurs) and raised $160,000 for charity.

 

Included in this post:

  • Proximity: Rethink what it means to be close.
  • Purpose: Find and align to a purpose that puts you and your collaborators into action.
  • Options: Focus not on creating a plan but on creating options.
  • Coordination: Create collaboration, finding ideas from non-obvious spaces.
  • Work through the messy middle to create a new order

 

Read the full article, What Today’s Most Influential Business Thinkers Recommend For Managing Through Covid-19, on Kaihan.net

 

 

Davide Gronchi provides a pragmatic approach to risk mitigation and shares a method he uses that was invented by the US military in the late 1940s: FMEA (Failure Mode and Effects Analysis) to assess risk under three lenses. 

Whilst in the middle of a heavy and unexpected crisis, company leaders are requested to keep looking far ahead and shape the future of their company by (re-)designing the strategy and how to implement it.

Current times are full of worries and threads, every day are more negative than positive news that capture our attention. How to concentrate on our business, sailing in calm waters and heading to a bright future? Yes, company leaders must keep this attitude! Nobody else can do this, it cannot be delegated. And recent research proves that CEOs like crafting strategy more than other tasks they are responsible for!

Nevertheless, we are all prone to see risks everywhere now during the COVID-19 crisis. This was a risk that nobody was really ready to mitigate. Nobody actually ever thought it could ever be real!

In our life of leaders, in our companies, many can be the risks that we might face and that need to be considered and need a mitigation plan. How to identify and prioritize risks?

 

The lenses for risk explained in this article include:

  • Severity
  • Occurrence
  • Detection

 

Read the full article, The Pragmatic Way for Risk Mitigation, on LinkedIn.

 

 

James Bowen takes a moment to muse on risk expectations and market values.

 

Today I read Christopher Schelling’s insightful article in Institutional Investor, “The Dust Bowl Ravaged 1930s America: Coronavirus is Today’s Equivalent.” It led me to thinking about risk, and in particular how a risk no one considered at all a little over a month ago has emerged to destroy trillions of dollars of value — perhaps not in percentage terms, but certainly in dollar terms the largest destruction of value in my lifetime. How can this be?

The market value of anything, whether a farm or a necklace or a share of stock, is what someone else is willing to pay for it. In financial markets, we should see a relationship between the market price of an asset and its future cash flows, discounted for the riskiness of the asset. The riskier the asset, the greater the rate of discount of the future cash flows. Of course, it’s all more complicated than that, but at its very core the foundational principle of modern finance is that return is commensurate with risk, and the sum of the expected future returns on an asset tells us what it is worth. When the riskiness of future returns increases, present value decreases, and vice versa. It’s that simple.

 

Read the full article, On Risk in the Coronavirus Era, on LinkedIn.

 

 

Vik Muktavaram recently published an article that evaluates the current crisis through four approaches of risk management.

“As the federal government finally took the first decisive step in stemming the outbreak of COVID-19 in the US, the images of serpentine lines of arriving international passengers at airports waiting for immigration and screening for COVID-19 coronavirus ubiquitous online and in print. Presumably, the rationale for the screening was that these arriving passengers represented a high-risk cohort. Yet, the long, crowded lines with no social distancing not only defeats the very purpose of screening but in fact, one could argue that the risk of spreading is increased substantially amongst the ground staff as well as passengers from different airlines. 

 As we deal with the COVID-19 pandemic, we should also be wondering how did we miss this when all the signs were there. How did some countries such as Singapore and South Korea manage to contain, if not necessarily prevent, the spread of virus in their countries despite their proximity to China? Risk Management is a structured way of looking at early indicators and prioritizing risks and then managing these risks. As our crisis response continues to be a case study in “how not to”, let’s take a step back to see how the risk (low likelihood, high impact) of a virus-pandemic became a crisis.”

 

The four approaches explored are:

  • Risk Transfer
  • Risk Acceptance
  • Risk Avoidance
  • Risk Mitigation

 

Read the full article, Covid-19 in the U.S. How a Risk became a Crisis, on the Rithym Advisors’ website. 

 

There are four good reasons for holding on to a cash-based economy. Tobias Baer reveals the hidden economic benefits and explains why cash is still king.

Do we still need cash? More and more stores are going cashless. A whole country—Sweden—is intent on becoming the world’s first cashless nation in 2023. The attraction is the savings from avoiding the substantial handling costs of cash. In many places, increasing numbers of consumers have stopped carrying wallets because their phones have become viable substitutes. And government agencies fighting tax evasion love the trail electronic payments leave.

 

Four reasons to keep cash explored are:

-Operational risk

-Privacy

-Hidden economic benefit

-Financial exclusion

 

Read the full article, Why We Need Cashon LinkedIn.