#27: EMBRACE RISK MANAGEMENT FOR BETTER DECISIONS

Chip Royce, Flywheel Advisors

Time to read: 5-6 minutes

Risk management is a key part of making decisions as a leadership team.

But how do you know which risks can derail a project like a new product or service, or a new sales channel?

How leadership teams arrive at decisions

Diverse opinions in a company are a strength if the work gets done.

The challenge is to get everyone on the same page and not derail your initiative.

Think of the different types of personalities in your leadership team and how they think about risk:

• Optimists ask the team to take a leap of faith, without addressing reasonable risks.
• Pessimists dig their heels to address the many risks, at the cost of vision and opportunity.
• Realists broker between the Optimists and Pessimists, leading to scope creep and compromise.

You can’t move forward without agreement from the different stakeholders.

Seldom can you avoid scope creep and compromise, which introduces new issues:

• Your project doesn’t mirror the original intent
• You’ll spend effort without improving the customer experience
• You question if the project is even worth pursuing

What if your leaders had a process to arrive at a great plan, without compromising?

A process that:

• Combines the strengths of the Optimist, Pessimist, and Realist?
• Lessens the impacts of each leader’s weaknesses?
• Keeps projects on track with their original intent?
• Addresses key risks that matter?

Here’s a three-step framework to ensure a great project and tackles possible risks

1. Map the customer journey

Plot out your initiative and take into account all the interactions, both inside your company, and customer touchpoints.

You will identify all the items that might go wrong along the way, no matter how improbable.

Ensure all the stakeholders participate, don’t let anyone off the hook. You need their participation for a later step.

2. Risk Assessment

Now you have a list of all the risks for your project. Assign a metric that measures the impact of each risk and another that addresses how likely it might occur.

From here:

• Tackle/fix easy items. In our example (highlighted in yellow), an internal reporting issue impacts the entire company. No reason not to work on this and remove it from the project risk assessment.
• Ignore items that are unlikely and outside of your control (‘asteroids’). Our example, highlighted in red, has a worldwide internet outage. Yes, they are a risk, but they are so unlikely and catastrophic, that any effort is better spent on what you can control.
• You’re left with a smaller, focused list of your real risks. You’ve established a much more manageable set of risks to resolve for your Optimists, Pessimists, and Realists.

3. Tackle the top 3 risks

From that list, isolate only the top 3 items. These are likely and the highest impact. Any remaining are less important to get your project going.

You now have a clear path to consensus and an effective decision without extra noise and conflict.

And an execution plan should you decide to move forward.

Bonus Tip

Assign responsibility to keep the list updated on an ongoing basis (your COO or another operations leader?).

Once you’ve mitigated the first three risks, come back and address the next three.

Or you might find new risks have appeared. You’ll re-prioritize resources, adjust your plans, and ensure strong execution.

In conclusion

The diversity of opinions and skills is a tremendous asset to your team’s ability to execute.

However, you can’t let different risk profiles block your company’s ability to make progress.

Implement our risk framework and you will:

You’ll find:

• Alignment with the different personalities in your leadership team
• Common way to assess risk and make decisions
• Effective use of your company’s resources while generating better business results.