Annual Conference B2: Risk management for leaders | NCVO
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Presentation from Annual Conference, 20 April 2017 Kate Sayer
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Annual Conference B2: Risk management for leaders | NCVO
- 1. RISK MANAGEMENT FOR LEADERS KATE SAYER 20 APRIL 2017 Dinner sponsors: Media partner: Partner sponsor:
- 2. AGENDA Focus on managing risk How risk management is relevant to leaders Talk about culture Think about risk-taking And more…
- 3. RISK MANAGEMENT PROCESSES Talk to your neighbour 3 minutes each way How is risk managed in your organisation? HOW DO YOU DO IT?
- 4. TRADITIONAL APPROACHES Identify all the risks you can think of Rank them for impact and likelihood Multiply the factors to prioritise risks Present in a risk register Variations on this? RISK REGISTERS
- 6. RISK AVERSE ARE BOARDS REALLY THE PROBLEM?
- 7. CULTURE CREATED BY RISK REGISTERS? 7
- 8. LEADING RISK MANAGEMENT Trustees Audit committee Middle managersSenior managers Strategic risks • External • Outside your control • Possibly high impact Operational risks • Internal • Within your control • Possibly high probability Mitigation Response plans Reduce likelihood Framework of controls Management assurance on control Active, regular monitoring
- 9. STRATEGIC RISKS Often external Need to monitor regularly Focus on high impact risks and scrap the ranking Talk about how you would respond if that risk event materialised – rehearse Clear responsibility for developing response plans and implementing
- 10. STRATEGIC RISKS THE BIG FIVE
- 11. OPERATIONAL RISK ASSURANCE Managing day-to-day risks is part of the normal management job Describe the actions and processes in place to manage risk Map to the risks Identify gaps or overlaps Notes on further actions or changes Annual sign off Provide training and coaching
- 12. RISK POLICY Policy should describe attitude to different areas of risk Where it is appropriate to take risks Level of risk that is acceptable in different scenarios Communicate the risk policy Review strategic and operational risk in the context of the policy RISK-TAKING – NOT RISKY
- 13. RISK FOR INNOVATIVE ORGANISATIONS Starts with risk policy Project management tools Pilots Feedback mechanisms Pre-mortems Multi-disciplinary teams Finance team engagement
- 14. RISK CULTURE IN INNOVATIVE ORGANISATIONS Feedback not failure Fail quickly Reward the right behaviours People are well-intentioned Talk about the strategy Devolved structures Theory Y organisations as described by Douglas McGregor in “The Human Side of Enterprise” 1960
- 15. SUMMARY Do you discuss your big risks regularly with senior managers and the Board? Do you have response plans for major strategic risks? What is the culture being created by your approach to risk management? What do you want your culture to be? Where do you want to be risk-taking? Where should you accept risk? QUESTIONS FOR LEADERS
- 16. MORE INFORMATION Rethinking risk: beyond the tickbox Free to download on our website www.sayervincent.co.uk Contact Kate.Sayer@sayervincent.co.uk
- 17. “Discipline makes daring possible” Dr Atul Gawande – 2014 Reith Lectures – “The Century of the System” 17
Editor's Notes
- Do risk management processes work? More precisely, do the processes you have in place actually manage risk? And what do we mean by ‘manage risk’?
- Putting a risk on your risk register does not necessarily mean that you are managing it. There are many flaws with the process and with risk registers – I won’t go through all of those here
- Focuses on the negative Fails to say where risks will be actively taken Risk management is seen as a separate activity We imagine we can think of all the risks And consequently we often find three things: The risk register is a list of things that we are worried about It doesn’t contain the biggest risks your organisation faces Often it doesn’t reflect the risks around missed opportunities Yet, people do talk to us about their biggest risks and opportunities when we engage them in conversation. So just take a moment now to jot down What is the biggest risk your organisation faces? What is the biggest opportunity?
- I often hear charities complaining that Boards are risk averse – and attribute this to the individuals on the board. But what if it is not caused by the individuals bringing a risk averse mindset to the board table, but the way that we undertake risk management and the way that we communicate it? And there is different problem which I have only recently been learning about – risk assessment puts you in a mindset of “loss”. This triggers a fear of loss – so we are then operating in a mode of fear, protection, hanging on to what we have. It is all about AVOIDING. A different part of our brain is activated when we consider the rewards associated with risk-taking. This makes us feel joyful, positive towards those around us. It often makes us feel more confident and we can feel more capable – “in flow”. Energised is the word people often use. This is about APPROACH. Now, the tricky thing is that fear of loss or harm has several times more power than a reward. Daniel Kahnemann in his experiments showed that people hated loss. Less inclined to move to action to claim a reward. Combine that with a bias towards keeping the status quo.
- Compliance-focussed - tick box mentality Complacent – assume that they can identify all risks and that all risks are knowable Organisation is cautious and feels that things happen to it – e.g. cuts to funding Top-down processes for risk, planning and budgeting Hierarchical – decisions have to be passed up the line Staff follow procedures without question – you are told off if you don’t follow procedures, so even if it does not make sense, they follow procedures Staff don’t use their initiative Difficult to get change accepted This sort of organisation is described in Matthew Syed’s book ‘Black Box Thinking’. Where people feel that they will be punished for errors, they go unreported, so improvements are not made. A classic example is healthcare, where managers and clinicians are defensive, but often are not even aware of the impact on the culture that this has.
- This is what you should be talking to the Board about Integrate into strategic planning, Board agendas
- This helps to identify where you should not over-control Take risks – e.g. in advocating for your cause Accept risk – where it is part of achieving outcomes e.g. You make grants to refugee groups. There is a risk that they will not deliver all the outcomes. This is a risk worth taking and you can accept it because it is your policy to take risks in grant-making for hard-to-reach groups.
- Effective risk management should enable organisations to take risk Having basics of strong risk management – communicated thru the organisation breeds confidence in taking risks “Brave and rigorous”