Can You Manage Risk Without Managing Behaviour?
This is a question I am often asked when working with Managers.
To better explain it, you must begin by understanding the Role of employee behaviour in an Enterprise Risk Management definition. When I say “employee behaviour“, do note that I am referring to all employees in your organisation. From Executives to Junior Staff. Risk can emanate from anywhere – and – anyone – in your organisation.
Managing risk could feel like a never-ending chess game sometimes.
Today, risk management is all the buzz. The recent global events related to COVID-19 have propelled a plethora of discussions on how organisations manage risk into Executive Board Rooms. To say that COVID-19 left many organisations with their pants down, would be putting it mildly.
Around the world almost everyone struggled to find their balance as things came tumbling down around them. If managing risk means managing uncertainty then, COVID-19 was a fast-tracked Doctorate in the subject!
Those organisations that were able to rise above the events and shine were those whose employees’ behaviours were adaptable, creative, street-smart, fast-thinkers, effective planners, resilient, courageous, strong decision-makers, change-savvy, empathetic, calm under pressure. Having an MBA, or two, was not a measure for getting through this admirably.
Were you surprised that most of these employees were front-line or low-paid employees? The drivers, the supermarket attendants, the farmers, the nurses and doctors, the manufacturing floor workers. Most of the employees in these categories do not enjoy the big-bucks and perquisites.
In spite of that, their behaviours got us through the labyrinth that crippled the world and brought it to its knees.
Risk Management and Enterprise Risk Management – Is There A Difference?
Managing risk means managing being able to identify possible negative events, situations, problems and disasters BEFORE they happen. It also involves using probability to determine the likelihood of their occurrence. If you are able to predict or ascertain a risk, it would be easier for you to design a policy, strategy and action plan to mitigate against that risk taking place.
A simple example: If I know that the brake pads are low on my vehicle, I will not drive speedily to get to the garage to have it changed. I will take my time, especially on a wet road. However, if I do not know the condition of my brakes, I will be oblivious to the risk they pose and continue to drive merrily and speedily along the highway.
Risks may be within your sphere of control, for example who you hire or, it may be outside of your control, as COVID-19 is.
Enterprise Risk Management or ERM as it is affectionately called, is an integrated and disciplined approach to managing risk across an entire organisation and into its extended networks, This may include, producers, suppliers, contractors, and so on.
Enterprise Risk Management Is Misunderstood
If you bring all of your Executives into a room and asked each one to explain what ERM is, you may well get a different response from each one. As you ask more direct questions such as: How do we practice ERM? you will encounter even more confusion and disagreement.
The reason for that is, many organisations have not matured in their ERM thinking, behaviours, practices and initiatives. In my experience over the years, for most executives, ERM involves detailed lists with summaries of possible responses which were created in a time far removed from the present or the future.
This exercise is done to create a false comfort in their minds and that of other employees. The thinking is, if we have noted the risk and we have a response to it, we are fine.
But given the rapidity of change in the world and business today, risk is very dynamic and the ability to perform effectively within that space rests with your employees and the collective behaviours in the organisations.
- Is risk management a high priority on your executives’ agenda?
- At best, is it even on their agenda or, do they give it passing attention every once in a while?
- At the worse, is it given attention when something goes wrong and someone has to held accountable?
Employee Behaviour IS The Engine That Turns ERM
If COVID-19 taught us nothing else, it confirmed that people are our most valuable asset. Without people to run the hospitals, care for our sick and dying, dispense medication, manage resources, this pandemic would have been a lot worse. And, it was horrific!
This was an unforeseen risk of the unimaginable kind.
Yet, there were countries and organisations managed by people who had the foresight to pay attention to what was happening in China as the virus began to spread.
Events were cancelled, borders were closed off and hard decisions were taken to manage the movement of people and mitigate the risks attached to spreading the virus. Preventative measures were implemented that included heavy sanitisation, wearing of masks, a reduction in the size of gatherings and, stay at home orders.
COVID-19 required a leap of faith into the unkown.
As the chaos grew, the courage and resilience of employees started to emerge. Assertive employees began to manage risk on the move and the risks were changing my the minute. These employees have come out of COVID-19 as heroes and admired for their brave actions and fortitude.
ERM Looks Towards The Future
Most admired are those employees who had the foresight and creative vision to look towards the future and question what life post COVID-19 would look like and would require. Effective managers and leaders would be those busy preparing for possible outcomes, applying the “what ifs” that accompany meaningful scenario planning.
After all, that is what risk management is all about, isn’t it?
An individual’s ability to creatively look towards the future, predict events, situations, results, occurrences that could or will negatively impact the organisation and design an actionable plan to mitigate them.
There is a technical side to Enterprise Risk Management. There are clear models and processes to follow but, at the heart of all of this there are employees – people – who live within the organisation and understand how it behaves.
More often than not, these are the employees who can better predict how the decisions made and accompanying behaviours will impact the organisation on a deeper level.
The organisation that embraces this belief and practices it by involving as many employees as they can in their ERM strategy and initiatives, are those that will stand a better chance of not just producing an ERM plan for the sake of ticking a box but, more importantly, ensure that ERM becomes woven into the fabric of the organisation’s behavioural norms and practices.
Rethink Your Relationship With ERM
If you understand and implement ERM well in your organisation, you stand a good chance of it being an effective and actionable tool to increase awareness and strengthen you leadership and management capability. However, you must ensure that it is embedded into your organisation’s decision-making processes and procedures.
In other words, it must become a behavioral norm. A way of life.
Your first step is to rethink your relationship with ERM. Break down the elements of it and develop a connection. Become comfortable with them and work towards finding a seamless fit for them in your organisation’s strategy, performance, goals, objectives and, most importantly, daily behaviours.
That is the only way that you will be able to bring ERM alive in your organisation and ensure that it becomes as effortless as drinking a glass of water.
Do you want to understand your role in risk management and how your behaviours could strengthen your effectiveness in this important discipline?
Leave a Comment below and let us know your thoughts on risk management, what resonated with this article or, how we may be able to support your growth and development.
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