63. Optimising Risk

In this episode I outline a method of turning risk on its head which gets killer outcomes for everyone involved.

When most of us think about a Risk Management Plan we start thinking red tape, no more freedom and a group of expensive auditors at our door to analyse our business inside out.

If you’ve ever had the risk auditors turn up and trawl through your business telling you all the things you need to write a report on you’ll know the meaning of paperwork.

But risk management is by no means a bad thing. It plays a vital role in creating sound business solutions.

Richard Branson famously said.

“As an adventurer…I try to protect against the downside. I make sure I have covered as many eventualities as I can. In the end, you have to take calculated risks; otherwise you're going to sit in mothballs all day and do nothing.”

Throughout my business life I have always tried to keep on top of costs and protect the downside risk as much possible. The Virgin Group has survived only because we have always kept tight control of our cash. But, likewise, I also know that sometimes it is essential to break these rules and spend lavishly.”

There is always a time and place for risk management plans. But they have a serious problem. Ask yourself a question, when was the last time you got out your Risk Management Plan and assessed every aspect in detail?

The problem with many risk management plans is that they don’t get big buy-in. In a business sense risk has a bad wrap. And here is the MAJOR reason why.

It is all about stopping things happening. Stopping sucks the energy out of a room. It’s not motivating or get everyone focused on the outcome. It doesn’t draw people up to their best performance.

How does risk assessment traditionally work

Risk is generally assessed against the impact and likelihood of bad event happening. It is at this point that it gets put into a matrix, given a code and then managed through a risk management plan.

This is where the psychology of high performance disagrees with this approach. The process loses focus on the outcome. Instead it sends people into the minute details of defence rather than that key steps to a positive and bigger outcome.

To spin it on it’s head we plot, the ultimate outcome or new event we want have happen (as opposed to stop happening)  on the traditional risk matrix. I.e. What is the current likelihood of the outcome happening and what is the size of the impact?

Some examples might be:

  • Zero Safety Incidents
  • Successful $100M Business Deal Announced to Market
  • Perfect Implementation of new business system

Now we optimise the hell out of it. Drive it up by increasing the likelihood and increasing the impact. What you’ll find is that people now are shoring up their plans with positive actions that are energising. And you’ll note that the likelihood of failure also plummets.

What this means is you start to take calculated risks and have done everything you can to increase the likelihood of success.

YOUR PROCESS OF OPTIMISING RISK

  1. Define the outcome
  2. Plot it on a matrix with the likelihood of success and positive impact on the business
  3. Question all your assumptions
  4. Plan how you can increase likelihood and impact through: Partnerships, Resourcing, Budget
    Relationships with key stakeholders

Chief, what I recommend you do is both the traditional and this method.

Stay epic

Greg