Traditional approaches to risk management should be challenged and radically changed. Starting with an assumption that human organisations are dynamic, complex systems where many of the key drivers of performance are intangible, hidden and inter-connected, I believe applied systems thinking can lead to a very different approach. So different in fact, that it is unrecognisable when compared with widely accepted approaches such as ISO31000.
Unrecognisable perhaps, but taking a systems thinking approach to risk and uncertainty is both practical and simple in its essence. Experience in many organisations has shown that leaders and staff at all levels can quickly grasp how and why standard risk management approaches are ineffective and even dangerous when applied to organisational risks. They can also quickly grasp new definitions, models and methods that are more complete and powerful.
Given that traditional risk management approaches are strongly entrenched, the ease and speed with which alternative, systemic risk management ideas are understood may seem confounding. I argue that this is because applied systems thinking makes clear, practical sense to most people. I also argue that the limitations of traditional approaches to risk become self-evident, obvious and inescapable once they are pointed out for the first time.
In this context, a major NZ Government Department has taken the bold step of moving far beyond the required risk management standard, to apply a risk leadership framework strongly focused on enabling the best possible decisions in an uncertain, complex and constantly changing world. For them, risk leadership is now being embodied in the way in which they carry out their core work, with much less emphasis on “risk management processes”.
As I will explain at the Measuring & Managing Strategic Risk in Government Conference, this strategy for performance in uncertainty comes with challenges. It brings into focus organisational weaknesses, cans-of -worms and hard issues that may in the past have been avoided or simply poorly managed. Leaders are also faced with the requirement to tackle root causes, not just the symptoms of poor performance. They have nowhere to hide. This can be confronting, especially for leaders who are out of their depth.
The alternative, of course, is more of the same. Which is what traditional risk management approaches are good at.
Dr Richard Barber will be speaking on ‘Radical new approaches to working with uncertainty’ at the Measuring & Managing Strategic Risk in Government Conference this September.