Five innovative approaches to risk management

March 11, 2018
Five innovative approaches to risk management

Go on, admit it. I won’t judge you!

You view risk management as a chore, a drudgerous necessity that keeps you on the right side of compliance, and helps the engine tick over smoothly, but results in your business spending far too much time chasing its own tail.

“How am I meant to innovate,” I hear you ask, “When I’m putting little ticks in boxes and putting out fires before they start?”.

Chances you need to reappraise your approach to risk management from the ground up, especially if yours is a larger business with a regimented risk management funnel.

Risk Management Strategist Steve Culp told Forbes that an innovative approach to risk management can stimulate, rather than impede innovation;

“Many people think a typical start-up – with its highly independent and empowered teams, agile development, minimal controls and executives who need to gain market share and have less to lose – is the ideal incubator for innovation. The opposite case could be made for a large organization, with a carefully structured risk management function.” – Steve Culp

Risk aversion is all well and good, but often a risk will arise that presents with it an opportunity to improve, adjust and innovate.

But deciding your approach to risk management needs to be evaluated isn’t the same as knowing how to implement a new risk management strategy in any meaningful way. Here are some approaches that you might want to adopt or adapt to suit your business needs:

Allow for “controlled explosions” Many innovative companies like to create a “safe”, controlled, measured environment in which to create risk that can be controlled, measured and managed in a formative way, between ‘sprints’ in a scrum development model, for example. Which leads us to…

Stay agile

We’ve already extolled the virtues of agile development over the traditional ‘waterfall approach’.

Staying agile not only allows risks to be detected early on, as testing is implemented from the start, but allows the presentation of risks to actually inform the development process.

Code storage

A good deal of today’s innovation of boundary pushing is done with code. So imagine the nightmare scenario of outsourcing a firm to build your new website or app, and the firm goes bust half way through development.

What happens to the unfinished code in which you’ve already invested time and money? Storing it in Escrow or a similar third party repository allows you to recover the unfinished code and get it completed elsewhere, saving you from potentially dire cost of time, money and resources.

Develop “growth layers”

Don’t be afraid to let risk management shape your business in new ways that you didn’t predict at inception.

This will help you to create healthy, sustainable growth. Monsanto, a company lauded for its innovation, realised the impact of GM on its seed business very early on. Investing in biotechnology research and development caused it to open its Life Science Research Centre, housing over a thousand new employees.

Consider the “dead man’s pedal” analogy

Originally innovated as a safety mechanism to stop runaway trains from killing people, the dead man’s pedal or dead man’s switch developed into the go-to model for operator safety. It was a safety switch that changed the way we thought about risk.

To strain this metaphor like it’s the last teabag in the house, hopefully this article has convinced you to stop thinking of risk as the brake on innovation, because in truth it is (or at least can be) the accelerator.

Risk assessment is, by nature a learning process and sometimes accelerating towards risk engenders a process or a set of skills that allow your business to grow.

This can sometimes mean releasing the dead man’s pedal and letting go of conventional metrics. Consider this parable of Swiss tool manufacturer Hilti who, tired of being undercut on price for their premium tools, accelerated into diversification, emphasising tool leasing and management for companies that were becoming increasingly frustrated by their own tool management.

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