What does risk mean to you? For a Grand Prix racing team it can mean managing a multitude of factors to get their drivers across that finish line. For businesses it means recognising external and internal vulnerabilities and managing them effectively to position themselves more competitively.
We made a conscious decision when managing risk. We had a works team relationship with Mercedes Benz: we were their prime partner for engines for 20 years and we won championships and we won many races with them. As was widely reported in the press at the time, Mercedes wanted to buy their own team but the management here were not prepared to sell the team. So even though Honda at that time didn’t have a power unit to the current regulations that was ready to go, we had been successful with them in the past and we took a big bet and a long-term bet that that was going to provide longer-term return on investment and a much stronger championship-winning position than a short-term view. So we’ve taken some pain in the short term and we’re managing through that.
Part of being “risk ready” is to ensure that the organization has identified the potential risks that could undermine or create barriers in the business and has developed a plan to address, manage, and mitigate those risks in order to achieve those goals. As Jonathan says, proper risk management can be a tool to ensure long term return on investment.
Part of being risk ready is appreciating that you cannot control everything...it is critical to have a risk response team – Jane Caskey
The notion of “risk ready” also involves the assessment of the probability of other (or unplanned) risks. A company must identify those risks that are most likely to arise and have a plan to manage and mitigate them. However, it must also identify the risks that - however unlikely - would be catastrophic and to have a plan in place. Having said that, part of being risk ready is appreciating that you cannot control everything. Knowing this, it is critical to have a risk response team, methodology, and culture that is nimble enough to deal with whatever happens, even if not anticipated.
I don’t think it’s possible to feel that you’ve ever done enough, because the nature of what drives you forward is that there’s always something more that you can do.
It is important to appreciate that being risk ready is fluid. ….you can identify a set of risks that are relevant today but the risk landscape is constantly evolving. For example, social media has transformed organization’s marketing strategies but in so doing, has also created new vulnerabilities in relation to reputational risk. Similarly, the de-aggregation of the workforce and the emergence of virtual teams has triggered the need to think differently about how to manage that workforce.