For as long as I can remember, the concept of ‘Risk versus Reward’ was deeply ingrained in our society and in business practices. Acceptance of this principle leads individuals to make decisions based on the potential gains that could be achieved without necessarily having the measures in place to define the success or failure of those decisions. However, perhaps we have had it all wrong in prioritizing the pursuit of reward or pleasure over avoiding pain or loss. This has been the effect of optimism on the effectiveness of risk management.
It seems that human nature leans more towards dodging potential harm than towards seeking pleasure. This inclination implies that our focus should shift towards actively preventing problems rather than solely aiming for the positive outcomes that seldom satisfy us.
Managing risk is not merely about taking chances and hoping for the best outcome. Instead, it involves proactively identifying potential areas of concern and strategically establishing conditions to mitigate or eliminate those risk events before they materialize into significant problems.
But, of course, you already know this. So, what’s different?
By focusing on problem prevention, we can better safeguard against potential pitfalls, disruptions and unexpected costs that can derail our plans or progress. Inside organizations, people already know how to do this since they have a store of data that tells them how often certain problems arise.
A prime example is the failure rate of projects and programs. The latest published data indicates that over 70% of projects do not meet their objectives.
Such a high failure rate demands some answers to these questions . . .
What are the recurring problems in projects that cause ‘failure to meet objectives’ at such a high and consistent rate?
Why is project delivery deemed ‘good enough’ even though it has not met its objectives?
Are the objectives too extravagant or unreachable?
Do the capabilities not exist or was the project not set up properly with the right conditions for success?
When the budget runs out, the deadline passes, and the scope has been changed again, it becomes a problem. When human resources are cut back and the project leader has to ‘make do’, it becomes a problem. Not all problems have one solution. Given the complexity of business, one needs to look at the issues from a 30,000-foot perspective (or higher) to get a systems view of risks and problems.
Perhaps it’s time to re-examine the whole system of program and project management!
This is not simply about re-inventing how projects are managed – it goes beyond that. Business challenges of the past five years have highlighted problems such as the following few among a larger list.
1. Employee engagement and motivation: Keeping employees motivated and engaged is an ongoing challenge for organizations, as disengaged employees decrease productivity and morale.
2. Resistance to change: Many organizations find it challenging to adapt to rapidly changing environments and technologies, leading to resistance to change among employees and management.
3. Communication breakdowns: Miscommunication, lack of transparency, and ineffective channels have led to misunderstandings and conflicts.
4. Innovation and creativity: Encouraging a culture of innovation and creativity can be difficult for organizations that are bound by traditional processes and structures.
5. Workplace diversity and inclusion: Despite efforts to promote diversity and inclusion, some organizations still struggle with creating an environment where all employees feel valued and respected.
These problems are complex and may not have immediate or straightforward solutions. At the same time, it is essential to consider the priorities - do we look internally at the organization and its people, processes, and systems or externally at the market, the competition, and customers?
If we don’t expect or aspire to be better, we never will be.
In an organizational context, effective risk management requires proactively identifying the indicators of potential threats and problems to their operations, reputation, or financial stability. It demands a focus on taking the necessary steps to put conditions in place that prevent or mitigate the risks from turning into an event that then becomes a costly problem.
By conducting regular unbiased and independent assessments of the gaps, barriers and patterns that compromise achieving objectives, management can redesign an environment that fosters a culture of performance, transparency, alignment and accountability.
In conclusion, the conventional notion of risk versus reward may need to be re-examined, with a greater emphasis on the importance of (problem) prevention over (reward) pursuit. By recognizing and addressing potential or emerging risks before they escalate, we can safeguard ourselves against unforeseen circumstances and navigate challenges more adeptly. This means always anticipating and looking forward – to the future.
Ultimately, embracing a proactive approach to risk management can cultivate resilience, protect our well-being, and pave the way for sustainable success and prosperity.
The accompanying illustration shows how Uvidi has turned the traditional ‘Bow Tie’ model of risk management into a standard that places ‘Risk versus Problem’ in a modern business context. We cannot improve risk management by having more problems to solve.
In my #newbook I provide a systematic approach for strategic and operational risk management that creates value at all levels of an organization.
Advance ordering date coming soon.
Uvidi Management Solutions www.uvidi.ca