Global Risk Management: A Cross-Functional Imperative & Organisational Necessity

Globalisation exposures more businesses, systems and communities to global risk(s).

As a result, threats, hazards, perils and dangers are unevenly distributed worldwide, across businesses and throughout business operations.

Therefore, risk management must be a team sport or collective undertaking, requiring inputs from multiple sectors of the business and professional/expert representatives.

"every entity has risks and risk experts and owners from different parts of the entity – they should work in unison led by an appropriate risk leader to triangulate and implement Risk Intelligence customized to their organization."

(Bonime-Blanc, 2020)

However...

“The electronic spreadsheet brought the power of business modelling to tens of millions. In so doing, it also paved the way for an epidemic of the Flaw of Averages?”

(Savage & Markowitz, 2009)

Not only are various threats, hazards, perils and dangers highly variable and distorted due to a post-COVID introduction, but they are even more networked, complex and disparately variable than pre-COVID.

Therefore, the risk is less static, linear and predictable than previously experienced for all primary, secondary and tertiary businesses.

Moreover, threats and risks are coupling, decoupling and interacting in varying ways, thwarting scheduled reviews and traditional, elementary risk management approaches.

Complexity necessitates complexity when it comes to the identification, analysis and management of risk(s).

"...another critical component of resilient Risk Intelligence is that all relevant hands are on deck to identify, assess, evaluate, mitigate and transform risks into opportunities within the universe of risk for an entity. That could and should translate into a high-level cross-functional or cross-disciplinary team of internal (and sometimes external) experts in a wide variety of important issues and topics emanating from the company’s strategy, tactics, footprint, products, services, etc. Such a team must work together periodically, consistently and systematically."

(Bonime-Blanc, 2020)

“The concept of risk is now well established as part of the language of social science. It is widely accepted that the experience of everyday life is significantly influenced by the ways in which individuals think and act about and institutions respond to ‘risk’."

(Petersen & Wilkinson, 2008)

"Resilience-based approaches, while helpful in promoting expeditious recovery for normatively beneficial systems, can engender infrastructural or cognitive drawbacks that must be carefully guarded against. When system appetite or acceptance of risk is unacceptably high, or when individuals, communities or businesses believe that, if a catastrophe happens, someone else (often the government) will jump in to help recover and rebuild any lost assets or system functions, such resilience-based approaches foster an environment amenable to moral hazard"

(Florin & Trump, 2018)

“…although resilience appears at first sight as a systems theory, its main effect is to emphasize the need for adaptability at the unit level.?”

(Bergstrom & Dekker, 2019)

“Resilience has an immense, diverse and immature literature...the resilience literature focuses on developing theory and defining resilience. Further research is needed that assists organisations to understand how to become resilient. Although ecological and socio-ecological systems have been studied empirically, more empirical research in applied organisational settings is required to validate proposed theory, using case study and survey methods. Investigation of extended enterprises and supply chains is also needed, focussing on how to build resilient characteristics.?”

(Ridley, 2017)

“Resilient systems are created not by simply focusing on human operators but instead by carefully designing the system to prevent and control hazards as much as possible, including the operator as a critical component of that design…if emergencies do arise that the system is not designed to handle, the system is designed so that human operators can be successful in handling it and that the tools exist for humans to be resilient in the case of emergencies.”

(Leveson, 2009)

In sum, resilience is increasingly dependent upon frontline awareness, participation and management of threats, hazards, perils and dangers that support the mitigation and management of risk(s).

While this may seem the like the 'old' risk management approach, globalisation, complexity, network issues and increasingly independent actors, systems and choices necessitate a risk review.

Teaming is the new risk paradigm.

However, teams create, attenuate and distort risk in various ways.

Therefore, "risk teaming" has become the new complex challenge for organisations as teams, expertise, culture and pedigree grow.

In short, how risk intelligence, decision-making, choices, trade-offs and priorities are formed, as the new imperatives for individuals, practitioners, professionals and executives.

Tony Ridley MSc CSyP MSyl M.ISRM

Risk, Security, Safety, Resilience & Management Sciences

Reference:

Bergstrom, J. and Dekker, S. (2019). The 2010s and Onward: Resilience Engineering, in Dekker, S. (ed) Foundations of Safety Science; A century of understanding accidents and disasters. pp. 391-429

Bonime-Blanc, A. (2020). Gloom to Boom: How leaders transform risk into resilience and value, Routledge,?p.326

Florin, M. and Trump, B. (2018) Resilience in the Context of Systemic Risks: Perspectives from IRGC's Guidelines for the Governance of Systemic Risks.?Domains of resilience for complex interconnected systems.,

Leveson, N. (2020). Safety III: A systems approach to safety and resilience, MIT Engineering Systems Lab, Aeronautics and Astronautics Department, MIT.??

Petersen, A. and Wilkinson, I. (2008). Health, Risk and Vulnerability: An Introduction,?Routledge, pp. 1-15

Ridley, G. (2017) ‘Resilience and National Security’, in Dover, R., Dylan, H. and Goodman, S. (eds) The Palgrave Handbook of Security, Risk and Intelligence, Palgrave Macmillan. pp. 79-98?

Savage, S. and Markowitz, H. (2009).?The flaw of averages: Why we underestimate risk in the face of uncertainty. John Wiley & Sons.