- LATEST BLOG POST
- echo $post_date ?>
- Integrated and convergent risk approaches need some discussion. Are they so different? And what about the good old Enterprise Risk…
- Read More
Key risks rank as number 1 in the measurement category while organizational purpose and values are the first in the communication side.
We are not surprised by this “changes”.
CEOs are realizing that risk assessments based on FMEA, risk matrix, and other Probability Impact Graphs (we like to call them PIGs) only clutter their horizon, leaving them struggling, and realize it is difficult to communicate organizational purpose and values if one does not know the risks the company exposes itself or exposes the public to. No wonder Canadian CEOs are looking to improve measurement, risks communication
For example in this post we showed how to stop struggling.
One of the problems arises from the ubiquitous confusion between risks and hazards and the resulting idea that mitigation are “obvious” selections. A hazard list (often actually a concern list) is not a management tool and is actually often misleading, thus forbids good decision making. The management tool is a quantified and prioritized risk register, where hazards are coupled with their consequences and risk evaluated, then ranked.
Let’s use the story of the “hot-dogs vendor and the crisis” as a vignette.
Once upon a time, a man sold hot-dogs on the side of the road. He grilled and sold the best hot-dogs in the region. The man had no radio, cellphone or even read newspapers.
He would display signs on the roadside and advertised his products by shouting… People would stop, buy and come back as they loved his delicious hot-dogs. Sales were increasing and he would buy the best bread and best sausages. It became also necessary to acquire a larger stove to meet the larger number of customers. So the business prospered… and expanded.
With the money he earned the hot-dog vendor was able to pay his son’s tuition in a good school. The boy grew up and went to study economics in one of the best colleges in the country.
When the son graduated and returned home it became apparent to him that his father continued with business as usual, selling hot-dogs made with the finest ingredients and spending money on signs on the roadside. He soon decided to have a serious conversation with his father.
“Father, why don’t you listen to the radio, watch TV, read the papers? There is a great crisis in the world and the situation of our country is critical. We must save money!”
NB: the son made a hazard statement which was actually expressing a concern, a fear, did not pair the hazard to possible consequences for the father business and simply proposed a generic possible mitigation. All gratuitous, unsubstantiated “opinions”.
After listening to the his son’s considerations, the father thought, “Well, if my son, who studied economics in the best college, reads newspapers, watches television and internet, I should assume that he can only be right!”
He started reading and listening, and soon became very concerned about the crisis.
As a “gut reaction” to his son “advice” the father sought a cheaper supplier of bread (lowered the bread quality), started to buy cheaper sausages. To save money, the father also stopped displaying signs on the roadside. Slaughtered by the news of the crisis the father stopped his trademark shouting to offer his products.
Sales soon plummeted until reaching unsustainable levels. The once flourishig hot-dogs business failed miserably.
NB: unjustified mitigations of “concerns” can backfire! No one evaluated the risks linked to any of the steps to “saving money”
A very saddened father told his son, “You were right son, we are in the midst of a major crisis.” And to his friends he would say proudly, “Blessed the hour in which I sent my son to study economics. He was the one that told about this crisis… hopefully my savings will be enough.”
In a risk assessment we always look at: