Employing risk to promote innovation and drive growth

The reality for many organisations is that established risk-thinking serves to stifle innovation and acts as a brake on growth. The counter to this requires the governing body to embrace new and better ways of overseeing risk matters, and one such way is to actively seek revelation, not just reassurance.

When we look in the mirror, we do so with the aim of confirming that things are as they should be, rather than seeking new insights about ourselves or uncovering hitherto hidden features; we look in the mirror because we need reassurance. The same is true for organisations, particularly with reference to how governing bodies channel data and information upward through committees to feed strategic decision-making. If we accept that decision-making is a function of how effectively information is converted into knowledge, organisations need that information to do more than just reinforce established views; boards need that information to help them look for the organisation, not just at it.

Many risk reports (and the practitioners who produce them) remain wedded to predictive techniques and to the familiar axis of ‘impact and likelihood’. Predictive risk techniques seek to offer a forward view, and do so using past data (often absent of the learning which went with it). As a result, threats are routinely presented as being understood, assumptions remain unchallenged and future outcomes are offered with certainty and confidence. The truth is that future conditions, circumstances and events are all highly uncertain, knowledge and understanding are flawed, and modelling generates unreliable conclusions. To some degree or other, forecasting always fails.

The simple truth for boards is that the inaccuracy of information is a given, or at least it should be, and the impossibility of predicting the course of most, if not all events, should be apparent to everyone. Due to an absence of meaningful assurance, the danger is that boards labour under the belief that the organisation’s risk reality is clearly laid out before them in the reports they receive. Foresight is truly an enabling factor for boards, not because it points to specific event scenarios, but because to be effective, it requires a deep understanding of the organisation’s strengths and weaknesses.

Each and every organisation enjoys some degree of power – that is, the ability or capacity to get things done or to have the desired effect. It is these powers, or rather what the organisation does with them, which can also prove to be revelatory, and it is our reflections on the COVID-19 pandemic which still provide many of the most useful pointers in this area. Those organisations which demonstrated the ability to occupy the spaces created by the pandemic needed to do so at speed. The challenge in the post-pandemic environment is to maintain that same sense of urgency which allowed for greatly accelerated decision-making and much reduced cycle times, underpinned, of course, by a new approach to the consideration of risk.

The uncomfortable truth about the pandemic is that for years boards had simply been unwilling to acknowledge that this level of disruption was even a possibility. In the rush to re-establish themselves as measures associated with the pandemic were withdrawn, many organisations then neglected key aspects of post-crisis learning and the efforts needed to identify how they had been exposed. It is important to remember that during this period, new operating models rapidly began to take shape, not least in respect of education and learning and also in hospitality, and whilst many sectors saw short-term demand fall to near zero, others received an unexpected fillip either through new orders or through the ability to re-tool or establish new ventures.

Through engaging with risk concepts in new and imaginative ways, it is those organisations that have been able to recognise and harness their powers that have been able to evidence reshaping and growth during the post-pandemic years.