Cre­at­ing risk as strate­gic ad­van­tage

Business First - - CONTENTS - by Steven & Chus­tisa Bow­man

Com­plex­ity and vo­latil­ity in the busi­ness arena is higher than ever. Ev­ery­thing is chang­ing. This brings about more pow­er­ful and di­verse sources of risk. Though risk is in­her­ent within all busi­ness op­por­tu­ni­ties, many lead­ers pre­fer to be risk averse. They view risk as a threat, and avoid­ing risk at all cost as the goal. They of­ten feel dis­trust­ful and sus­pi­cious, not want­ing to re­ceive any kind of risk. Risk averse people dis­like risk, and there­fore will stay away from adding ven­tures to their busi­ness be­cause of the per­ceived risk of that ven­ture, and in turn will of­ten miss out on new and dif­fer­ent pos­si­bil­i­ties.

When people are un­will­ing to re­ceive change, they’re more likely to avoid tak­ing risks that would in­vite change. This al­ways leads to missed op­por­tu­ni­ties. Risk aver­sion of­ten gen­er­ates pro­fes­sional com­pla­cency, squashed ini­tia­tives, pro­motes un­think­ing com­pli­ance and cul­ti­vates an un­con­scious or­gan­i­sa­tion. Con­se­quently, the or­gan­i­sa­tion op­er­ates in a weak po­si­tion and or­gan­i­sa­tional ac­com­plish­ments are hin­dered.

One of the best pre­dic­tors of an or­gan­i­sa­tion’s health is how well the busi­ness ex­ec­u­tive and teams are will­ing to re­ceive risk and re­spond to changes. The stay­ing power and longevity of or­gan­i­sa­tions is al­ways de­fined by their abil­ity to take ad­van­tage of new and dif­fer­ent pos­si­bil­i­ties that are pre­sented. In most set­tings, a pos­si­ble fu­ture event will present both risks and op­por­tu­ni­ties.

The abil­ity to deliver growth and per­for­mance in volatile busi­ness cli­mates with con­fi­dence and clar­ity has be­come a busi­ness im­per­a­tive in the wake of the fi­nan­cial cri­sis. In the cur­rent en­vi­ron­ment, you must de­velop the abil­ity to con­sciously and ef­fec­tively deal with un­cer­tainty and risk. In or­der to thrive

in cur­rent econ­omy, where cre­ativ­ity and in­no­va­tion will be re­warded, you have to be able to take risk and to see it as a strate­gic ad­van­tage in­stead of some­thing to avoid. You must be able to per­ceive and re­ceive the changes, pos­i­tive and neg­a­tive, that may af­fect your or­gan­i­sa­tion and the world. You must also trust in your abil­ity to re­spond to these changes as con­sciously and skill­fully as is re­quired. What if risk was not a threat, but an op­por­tu­nity? Sadly, most people view risk and op­por­tu­nity as op­po­sites. They see risk as some­thing bad and op­por­tu­nity as some­thing good. In our view this is an er­ro­neous in­ter­pre­ta­tion. Con­cen­trat­ing purely on see­ing risk as neg­a­tive and a threat will also con­strain think­ing about or­gan­i­sa­tional strate­gies and ob­jec­tives. You can’t have judge­ment about risk be­ing a bad thing and see­ing risk as a strate­gic ad­van­tage at the same time. Ev­ery judge­ment takes you out of aware­ness of ‘what else is pos­si­ble?’ If you are con­stantly look­ing at what could go wrong there will be a nat­u­ral ten­dency to set fairly con­ser­va­tive, low risk strate­gies. This may be en­tirely ap­pro­pri­ate for or­gan­i­sa­tions with a low risk ap­petite and an un­ad­ven­tur­ous at­ti­tude. Main­tain­ing this point of view will in­hibit think­ing about those risks or sit­u­a­tions that you may be able to ex­ploit to ex­ceed your tar­gets or per­ceive new and dif­fer­ent pos­si­bil­i­ties.

Risk is in­her­ent when you en­deav­our to do some­thing new, and by def­i­ni­tion at­tempt­ing to gen­er­ate new busi­ness calls for a new way of be­ing. Please recog­nise that ev­ery­thing you’ve de­cided you can’t re­ceive equals your in­abil­ity to re­ceive dif­fer­ent pos­si­bil­i­ties. Great op­por­tu­ni­ties in busi­ness al­ways come from oc­cur­rences and episodes that are hap­pen­ing now. You have all choices avail­able when you are will­ing to re­ceive risk. Ob­ses­sion with se­cu­rity and pre­dictabil­ity The goal of most or­gan­i­sa­tions has been to stamp out un­pre­dictabil­ity and to avoid risk. In or­der to main­tain pre­dictabil­ity and se­cu­rity you have to be­come risk averse and it re­quires judge­ment to main­tain this. Any time you judge some­thing as neg­a­tive or come to a con­clu­sion about any­thing, noth­ing that doesn’t match your judge­ment or your con­clu­sion can come into your aware­ness. Most people are un­will­ing to risk, be­cause they don’t want to lose. So, what would it be like to no longer judge risk as neg­a­tive and bad? What would it be like if risk was viewed as just an­other way of look­ing at po­ten­tial op­por­tu­nity and in­no­va­tion? What if risk man­age­ment was viewed as in­no­va­tion?

How you see risk of­ten shapes your busi­ness strate­gies. You have to be will­ing to take ad­van­tage of risks to change your busi­ness. If you can’t see risk as op­por­tu­nity or as a strate­gic ad­van­tage, you will never cre­ate a busi­ness that is more than what you cur­rently have. Is that re­ally what you want? You know you would like to have greater. You have to start look­ing at: “How do I take ad­van­tage of ev­ery­thing that I judge as risky?” See­ing risk as strate­gic ad­van­tage and an op­por­tu­nity en­abler can open your mind to the full range of dif­fer­ent pos­si­bil­i­ties from fu­ture events. Break your pat­tern of think­ing about risk There is a com­pletely dif­fer­ent way of view­ing things and a com­pletely dif­fer­ent way of man­ag­ing risk. First, you must be will­ing to push be­yond the points of view that con­strain your think­ing. You can break your pat­tern of think­ing about risk by rad­i­cally chang­ing your def­i­ni­tion of risk. It starts with rec­og­niz­ing that risk can be an op­por­tu­nity. In fact, the for­mal def­i­ni­tion of risk found in nearly all in­ter­na­tional stan­dards on risk, states that “Risk is any­thing that im­pacts on an or­gan­i­sa­tions abil­ity to achieve it’s strate­gic goals”. So, in­stead of judg­ing risk as bad, you may wish to start ask­ing, “What is the strate­gic ad­van­tage or op­por­tu­nity with this ‘risk’?” By ask­ing this ques­tion, you in­vite the aware­ness of a dif­fer­ent pos­si­bil­ity. Ask­ing this ques­tion also can al­ter your per­cep­tion of risks and pos­si­bil­ity, and may help you to let go of your neg­a­tive points of view that will never cre­ate in­no­va­tion or growth.

From this space you can ac­tu­ally thrive and find joy in work­ing with all the chaos that sur­rounds the cur­rent busi­ness en­vi­ron­ment. What would it be like if you were to have a level of aware­ness that was be­yond any­thing you ever thought pos­si­ble? This is what be­gins when you are will­ing to see risk as strate­gic ad­van­tage.

The key is, when think­ing about risk and un­der­tak­ing risk man­age­ment ac­tiv­i­ties, think about whether there could be a strate­gic ad­van­tage as well as a neg­a­tive con­se­quence from a fu­ture event. If there is, con­sider con­trols or strate­gies that might en­able the or­gan­i­sa­tion to cap­i­talise on such sit­u­a­tions should they arise as well as strate­gies or con­trols to min­imise po­ten­tial harm­ful out­comes. The abil­ity to see both the po­ten­tial op­por­tu­ni­ties and threats of risks will help or­gan­i­sa­tions to be bet­ter pre­pared and con­fi­dently make bet­ter de­ci­sions. When you start to have a judge­ment about the risk, you will of­ten start to limit what you can have or gen­er­ate for your busi­ness. In­stead, ask the ques­tion: “What can I do to use the man­age­ment of this risk to my ad­van­tage?”

Risk is al­ways present; its pres­ence is a fact of na­ture.’

Learn from na­ture Risk is al­ways present; its pres­ence is a fact of na­ture. Risk pre­sents both chal­lenges and new pos­si­bil­i­ties. In the nat­u­ral arena, floods and for­est fires can be seen as ter­ri­ble events, since they of­ten spawn dev­as­ta­tion in their wake. Floods gen­er­ally en­gulf the land­scape with wa­ter, but they also spread vi­tal nu­tri­ents. For plants, the sludge that is oc­cur­ring on the land­scape af­ter the flood is a strate­gic ad­van­tage. They take ad­van­tage of the nat­u­ral fer­til­izer to grow and flour­ish. In the case of for­est fire de­struc­tion, pine trees and other species have used these calami­ties for their own ben­e­fit. Af­ter for­est fires, pine trees of­ten flour­ish in­stead of per­ish. Fires gen­er­ate new spa­ces that al­low pre­pared pinecones to quickly take ad­van­tage of the space. What if you were will­ing to po­si­tion yourself to take ad­van­tage of ma­jor risks, and viewed all risk as po­ten­tial op­por­tu­nity?

Ac­cept­ing that risk is al­ways present is the first step to­ward man­ag­ing risks to take ad­van­tage of the op­por­tu­ni­ties and re­duce the ef­fects of the harm­ful con­se­quences. Take a few mo­ments to see what it would feel like to view risk as a strate­gic ad­van­tage. And what that might open up in your busi­ness. What might that gen­er­ate as a pos­si­bil­ity? When you are able to see risk as a strate­gic ad­van­tage, you start to cre­ate choice in your busi­ness. You don’t have choice other­wise.

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