3 Ways to Leverage Risk-Based Decision-Making for Planning and Performance
Successful organizations always operate with risk management in their sights, since their chief purpose in business is to achieve their objectives.
How often do they refer to their risks as they make decisions on their plans? Sadly, the evidence indicates that it’s not as often as they should.
3 ways to align your risk management plan
Here are three guidelines that help you to align your decisions to your plans and to your risks in a way that creates continuity and substance to achieving objectives:
1. A proper risk management structure that includes early warning systems designed for use in decision making. This is a best practice for many years. Implement a risk system that raises an alert when the business is off course and exposed to possibly not achieving an objective. Every decision maker should receive an early warning that captures their attention immediately.
The attention then needs to be directed to the next decision, given the new information. The decision that follows may impact the plan and its progress toward achieving the target objective. It is the continuity of this activity that is most often inconsistent, concluding with results that are less than optimal. This point is not about whether a system is in place or not, it is whether there is consistent and reliable use of the decision-making process when risks impact the plan.
2. Assess the impact of new information on strategic plans – this step is almost systematically left out in the adjustments and decisions necessary for plans going forward. Too many decisions are made with short-term results in mind, causing a disconnect between the risks and decisions of today to the results that span far beyond the next month or quarter.
Decisions and strategic plans are inextricably intertwined and co-dependent. The impact on new information is not only reflected on the numbers, but may also impact services, products, customer experience and third parties. All these elements must be balanced with new risk information and embedded into the decision-making process.
What is often overlooked at this step is the ability to recognize patterns. The patterns that occur in organizations are what many recognize as the ‘intuitive’ aspect of decision making. They just know that something is right or wrong with how the information is being used. The combination of information, risk and decision is what will ultimately be the success factors in executing strategy.
3. Always remember to identify where risk and decision have the highest impact. There are 4 basics; Objective – Outcomes (KPIs) – Strategies – Assumptions. If these are not at the forefront of every plan and decision, the risks identified are meaningless.
Objective: What are we trying to achieve? This applies at every level of the organization. Every decision should be taken with a view to answer: “What is the objective (purpose) of this decision?” “Why am I being asked to decide on this?”
Outcomes (KPIs): What will the achievement of the objective look like? How do we know we are getting close? How we will measure our success. Every decision needs to be made in the context of creating that outcome.
Strategy: Each type of outcome must have its own accompanying strategy. Mixing up multiple strategies to achieve objectives defeats the purpose of measurement and decisions.
Assumptions: No business operates without some assumptions. These should be made in the context of each strategy and the capabilities to execute.
By not thinking of risk as a threat it changes the dynamic of decision making. Risk-based decisions focus on the degree of uncertainty of an outcome, based on given assumptions, capabilities and degree of control. By making the decision traceable to the identified risk it makes accountability and consistency much more reliable.
The approach to risk-based decision making captured here is but a high-level snapshot to how more than 350 of our organizations are leveraging this system for better strategic planning, risk management and problem-solving. We invite you to explore options that add value to organizational processes and performance management.
Dragica is an internationally recognized expert in Risk and Compliance Management. She has more than 30 years’ experience working with diverse multi-national businesses and universities in Canada, USA, Asia, Europe and the Middle East. She has held several senior leadership and executive positions offering significant experience in both operating and advisory roles.
Dragica helps and coaches leaders to execute on their strategic priorities. She provides advice and guidance on decisions related to business challenges, compliance and risk management. Her varied experiences – both inside the corporate world and as a consultant, allow her to have a significant and lasting impact in the organizations with which she works by sharing the knowledge of ‘How’. She helps clients who want to get the most leverage from human capital, information technology and processes.
Dragica is highly sought after to bring the fresh perspectives and changes that will transform and raise the bar on the clients’ business. Her depth of knowledge in compliance and risk management has proven essential in the design and implementation of creative solutions and the decision-making process. She is a recognized world-class program strategist and developer, facilitator and coach. Her approach reflects her passion for a brave and bold future.
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