As a risk manager, you have to deal with uncertainty, complexity, and ambiguity on a daily basis. You also have to communicate risk to various stakeholders, such as senior management, clients, regulators, and team members. How can you do this effectively without causing unnecessary panic, confusion, or resistance? Here are some tips to help you communicate risk without alarming others.
Before you communicate risk, you need to know who you are talking to and what their expectations, concerns, and preferences are. Different audiences may have different levels of risk tolerance, risk literacy, and risk appetite. You also need to consider their background, culture, and personality. For example, some people may prefer quantitative data, while others may respond better to stories or visuals. Some people may want to know the worst-case scenario, while others may want to focus on the positive outcomes. Tailor your message and your tone to suit your audience and their needs.
Think of the audience as the consumer and put yourself in their shoes. What would you want to know and how would you want to be informed about it. This can't be done in a vacuum and also requires communication and direct questioning. Once you know all of this, then you know your audience and can tailor your communication accordingly.
Knowing the audience is critical to risk communication. Without understanding the audience, it is difficult to determine how best to communicate the risks and benefits of a given situation.Understanding your audience also aids in building credibility and trust. When you demonstrate an understanding of their concerns and challenges, you position yourself as a trustworthy entity. Addressing pain points of the target audience and providing valuable solutions solidifies trust thereby establishing a long-term relationship based on authenticity and reliability.
One of the challenges of communicating risk is that risk terminology can be ambiguous, subjective, or misleading. For example, what does it mean to say that a risk is high, low, or moderate? How do you define likelihood, impact, or exposure? How do you avoid jargon, acronyms, or technical terms that may confuse or alienate your audience? To avoid these pitfalls, you need to use clear and consistent language that is easy to understand and interpret. You also need to explain your assumptions, methods, and sources of information. You can use a risk dictionary or a glossary to ensure that everyone is on the same page.
Simple, clear, meaningful and consistent language, thought process and results tailored to the audience is all that is needed. This ensures transparency and clarity, which in turn generates support from others. No need to overcomplicate.
Centering an organization on a common nomenclature around how risk is referenced and measured improves each stakeholder's ability to understand potential risks. This shared understanding, in turn, allows for decisions that accurately reflect the impact on the business and align with company wide priorities
Another challenge of communicating risk is that risk information can be taken out of context or distorted by cognitive biases, emotions, or media influences. For example, people may overestimate or underestimate the probability or severity of a risk based on their personal experience, intuition, or exposure to sensationalized headlines. To avoid these biases, you need to provide context and perspective for your risk analysis. You can do this by comparing and contrasting different scenarios, using benchmarks or references, or showing how the risk relates to the overall objectives, strategy, or mission of the organization.
Establishing a clear context and perspective sets the framework within which a risk assessment should be undertaken, ensures the reasons for carrying out the risk assessment are clearly known, and provides the backdrop of circumstances against which risks can be identified and assessed. Moreover, Context analysis plays a crucial role in risk management by providing the necessary framework to understand and evaluate risks within a specific environment. It involves examining the broader circumstances, conditions, and factors that surround a situation, project, or organization.
One of the goals of communicating risk is to influence the behavior and decisions of your audience. You want them to take appropriate actions to mitigate, transfer, avoid, or accept the risk. You also want them to support your risk management plan and recommendations. To achieve this, you need to focus on solutions and actions, not just problems and threats. You need to show the benefits and value of managing the risk, as well as the consequences and costs of ignoring it. You also need to provide clear and specific guidance on what steps to take, who is responsible, and when to act.
By regularly scanning the landscape for high-impact risks, companies can adopt a proactive approach to risk management rather than a reactive one. This gives them more time to monitor the risks and prepare their responses, helping them act in a timely manner to minimize business disruptions and potential losses. With an enterprise-wide approach to risk, organizations can uncover high-impact risks that are either hidden or overlooked. For example, companies may find that a seemingly insignificant risk emerging in one area may actually have sweeping consequences across the entire company. The right tools, like key risk indicator dashboards, can increase risk communication and help organizations pinpoint risks in need of attention.
Finally, communicating risk is not a one-way street. You need to engage and listen to your audience, not just inform and persuade them. You need to invite feedback, questions, and suggestions. You need to acknowledge their concerns, emotions, and opinions. You need to address any gaps, doubts, or disagreements. You also need to follow up and update them on the progress and results of your risk management activities. By engaging and listening to your audience, you can build trust, rapport, and collaboration.
Feedback is essential for risk management, because it provides valuable insights, perspectives, and suggestions from the people who experience the risks firsthand.Good communication is essential for any effective risk management strategy.It's vital therefore that everybody in an organisation understands what risk management is and why it is important, and that they are involved in developing and implementing a risk management strategy.Communication does not start and finish with a single meeting to explain the risk management strategy, or one notice on a noticeboard. You have to continue to communicate what you are doing, and why you are doing it, at every step of the risk management process.