Published on June 28, 2020
William Hickman
Most senior leaders have extensive experience in understanding and managing risks through personal experiences, self-study, and engaging other leaders, but personal experience isn’t enough.
In today’s complex, ill-structured world, the best senior leaders acknowledge managing risk requires a business wide approach. Risk and uncertainty are not easily identified nor defined, and risk is more than compliance and safety concerns. Even when a leader correctly identifies a risk, the risk can morph in real time based on environmental conditions, competitor impacts on the market, and internal team dynamics. The best leaders look broadly to anticipate risks, seize opportunities, and build business resilience.
In the military planning process, the best organizations identified risks to the mission while developing courses of actions (possible solutions). Identifying potential risks early, improves a leader’s understanding and evaluation of courses of actions, identifying risk mitigation measures, and preparing the organization for any possible setbacks.
For a strategic leader, there are three elements to identifying and evaluating risk. First, risk assessment and evaluation require a desire to study, understand, and gain new knowledge on potential risks. Leaders, across an organization, increase their value with a drive to excel in risk assessment. Second, leaders understand risk mitigation and management are required. Leaders must embrace ambiguity and plan for uncertainty. Third, leaders communicate regularly, exchange ideas, and share their knowledge. Communication includes adding risk management to the organization’s leader development program.
To identify, mitigate, and accept risks, leaders establish a learning environment that is open to new ideas and challenges assumptions. This learning environment includes several innovative approaches to studying risk and uncertainty. Listed are four examples.
· Industry Futurist. Several times during my recent NATO assignment, we invited futurists to present their ideas to the leadership through formal presentations and informal discussions. While not predicting the future, a futurist enables leaders to question their assumptions, broadening their vision of the future, and at times, radically change their thinking and decision-making.
· Strategic Foresight. Many organizations commit resources to study their operating environment which includes identifying environmental categories to describe changes and enable understanding. Additionally, within the environment, trends are identified and the potential impact of the trends over time are analyzed. As an example, the NATO Transformation Command provides a robust strategic foresight capability for the alliance. The alliance’s environmental categories focus on influences to NATO’s security and include political, human, technology, economics, and environment. Many businesses also leverage foresight techniques to improve their long-term perspective and identify risks and opportunities.
· Diverse Group Discussions. Through diversity, an organization can prevent many cognitive traps such as group think which discourages creativity and mirror imaging which is assuming people think like you. Additionally, diverse groups challenge leaders, develop different perspectives, hold team members accountable, and move people intellectually out of their comfort zone.
· New Knowledge. Leaders receive new observations, analysis, learning, and experiences and form a new perspective or knowledge. As new technology can change an industry, new knowledge can radically change a business’s future.
When risk is present, leaders must focus their attention on gaining knowledge and understanding through a thoughtful risk appraisal process in an aggressive learning environment. With the knowledge, leaders can manage and mitigate risks, and seek positions of advantage and opportunities.
Enjoy your time as a leader. Every day, embrace the challenges, enjoy the opportunities, and focus on your team and the business’s success.
William Hickman is a Senior Advisor at Compass Executives Group.