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In search of opportunity

risk management Apr 04, 2018

As management guru Peter Drucker said, “Results are obtained by exploiting opportunities, not by solving problems.  All one can hope to get by solving a problem is to restore normality.  All one can hope, at best, is to eliminate a restriction on the compacity of the business to obtain results.  The results themselves must come from the exploitation of opportunities.”

This is one of the reasons why I don’t like the definition of the word risk, especially when used in the phrase “risk management.”  Look it up in any English dictionary and you will see risk defined as the chance or probability of loss, harm, or injury – all of which are negative outcomes, and fit into the problem category.

If we are going to protect and create value, we must use a different definition of risk.  The one I like is “the effect of uncertainty on objectives.”  An effect can be positive or negative, and when it is objective-centric it creates value.  This definition will bring about a paradigm shift in how we not only anticipate threats but also identify opportunities.

Instead of asking what can go wrong, we should consider asking what can go right.  Instead of asking about events that could threaten the achievement of our objectives, ask about opportunities to improve the likelihood of achieving those objectives.  It changes the whole conversation. 

As a strategic example, instead of asking “what could prevent us from achieving our revenue objective?”, ask “are there other revenue generating opportunities we should consider?”

From an operational standpoint, an alternative to “what could go wrong to affect quality?”, ask “are there areas where we can improve the quality of our products or services?”

Be sure to ask different stakeholders as their views may shed a new light on opportunities.  Include employees, suppliers, vendors, subject matter experts, and even competitors.

Effective risk management still requires addressing the threats, but it should be balanced with identifying opportunities.  That way it both protects and creates value for the organization, is much more interesting . . . and profitable. 

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