The necessity to safeguard commercial assets, information and reputation is increasingly at the forefront of our minds, driven hard by the media making much of poor corporate decision-making and planning. The world has changed, and it is ever more difficult to concentrate on the business of business; the mantra of just securing the bottom line has long since had its day.
The information age has brought both opportunities and challenges, and it seems risk management has attracted its fair share of each. To protect and also take forward our businesses we need to know what headlines are ahead, have we learnt the lessons of the past, have we been lucky so far and do we have a strategy to cope with future events?
Naturally, we only hear when things have gone wrong, and then we are treated to the full gory details of the cost to all aspects of the business. Just ask BP with its US$19 billion penalty pay-out for the Deepwater Horizon rig oil spill of 2010 raising the overall cost to the company to a reported US$70 billion. Its reputation severely damaged in the US, which even led to the potential of a buy-out of the company, you wonder how BP would change things if they had that time again. Or perhaps of more relevance, how will they deal with the next crisis?
Photo courtesy of Yoel Ben-Avraham
The challenge that most businesses face is that the great departmental silos represented in our business structures approach risk from different perspectives driven by their particular focus and goals. At Thomas Cook, for example, the general counsel was undoubtedly correct, in a legal context, to contest the case for liability in the tragic deaths of Bobby and Christi Shepherd in Corfu in 2006, although the sales department would likely disagree as they pondered the turnover figures for the following year… was that the start of the end for Thomas Cook?
Both instances were poorly handled, although neither occurrence was hardly unpredictable given the businesses that BP and Thomas Cook are in.
Image by courtesy of onewaystock.com
The essential ingredient to mitigating risk and exploiting opportunities is to acquire a better understanding of what is happening and importantly what could happen next. But… naysayers will say making sense of so much conflicting and ambiguous information and, in particular, predicting the future are impossible tasks.
That is not correct – but it does require a specialist skill to produce a rounded and connected view of the business environment, with the freedom and independence to see risks and opportunities in context to the overall business. There also needs to be a timely feed of accurate and relevant information. The spread of the intelligence analyst across business is testament to a growing acknowledgement of the need for this skill set.
It also seems the idea of a single executive responsible specifically for risk management across a company is being mooted more and more. I hope this notion continues to gain ground.
Some businesses are turning to outside specialist intelligence and risk management companies to fulfil this function, which allows experts to concentrate on this complex issue and to feed relevant lines of intelligence to the decision-makers whilst retaining an independent voice on business-wide risks. A big gain of this approach is a wider perspective of the threats and importantly the analysis of so-called Black Swan events; those occurrences that are rare and difficult to predict, but can have a massive impact on a company.
The final thought of this article is to emphasise that business opportunities are much harder to identify, and to pursue, if the threats and risks are not understood in context to the business operations. An interconnected strategy for risk management across the whole company will create an outlook where the ‘opportunity positive’ is judged in context with the ‘risk negative’.
Do you want to understand better the business dynamics in your sector? Are you looking for options to drive forward your business in a challenging environment? To find out more about what QRO Global could do to assist your business or to learn more about the types of projects that we have worked on in the past, see our Services Page or email us today – info@qro-global.co.uk
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