The 3rd Principle of Risk: Solutions

Last month we identified five sources of risk in the organization and how risk scenarios can help draw them out.  Now, it’s time to generate solid solutions at the lowest possible cost.  A clear understanding of the situation, a dash of creativity and proper motivation can yield effective and surprisingly inexpensive fixes.   

This work is best done by a small cross-functional team of staff.  An excellent management development opportunity, this process sensitizes team members to the many sources of risk in the organization.  Best industry practices worldwide should always be considered, but before simply copying ideas from elsewhere, make sure they are fully understood and feasible in your environment.   

The best solution to any risk is elimination, provided this doesn’t knock out a valuable benefit.  Next best is one that doesn’t rely on human intervention.  Simple is usually better.  Warning systems are next in line, but they must be reliable or they’ll quickly cause more harm than good.  Last come policies, rules and procedures.  While these are popular, their success depends largely on that very fallible creature – the Mark I Human Being.  Unless you can train vigorously and hold people to strict account, beware of procedural fixes! 

The good news: there are nearly always more solutions to your risks than you first believed.

If you can’t prevent, mitigate

 If those fixes can’t or don’t prevent loss, there are at least a dozen techniques for reducing the severity of that loss: we’ll explore them in future issues. 

If you can’t mitigate, stay on your toes!

We can safely assume that things will go awry.  There’s even a law for it!   To keep risk awareness at the top of everyone’s mind, ask “What if?”  questions and insist on a ready plan.   These inquiries and their answers can keep your organization on its toes against foreseeable loss.  More on contingency plans and other management controls in an upcoming issue.

Recommended Reading for Risk Managers

Hostages of Each Other: The Transformation of Nuclear Safety since Three Mile Island  by Joseph V. Rees, describes how a complacent US nuclear power industry pulled itself up by its own boot-straps. It is good reading for other industries with public safety responsibilities. The need for self-policing became clear in 1979 with 3MI: the next accident would cause a public outcry that could kill the industry. Rees argues the turnaround hinged on the industry’s formation of its own safety watchdog, the Institute of Nuclear Power Operations.  Even critics agree it has been tougher and more effective in raising standards than the government regulator. 

What emerged was a whole new industrial ‘morality’, based on surprisingly candid internal communication.  Too many good ideas to list here! 

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