Written by Eva Normell, Partner at Purple Ivy AB
Do you dare to ignore risks? A business opportunity always involves risk taking, and risks always involve opportunities.
How you view risk management is crucial to your company’s development. If you don’t dare to take risks, your development will stagnate. But if you take risks without understanding the potential consequences, you could end up in a situation where you lose the confidence of your customers, employees, partners and/or other stakeholders.
My own journey
When I started working with risk management about 15 years ago, I didn’t think it would be my thing. According to people who know me well I’ve always been the kind of person who takes big risks. That’s because I’ve had to, since I’m the curious type that likes to test new and unknown things. At first I thought that risk management would hinder my creativity and stop me from exploring. But I have learned that risk management doesn’t prevent me from doing things – it actually helps me to get results from my investments and achieve my goals in a more proactive and focused way.
For companies, the more fast-moving and future-gazing you are, the more benefit you will gain from risk management. A risk management mindset and the associated tools have consistently provided me with the clarity and simplicity required to set priorities in my role as a leader. Risk management has also helped me and many of my clients over the years in developing strategies, running projects and establishing or altering processes.
When should you use risk management?
Risk management is the most efficient tool you can use if you want to work proactively. When you work with risk management, you should always start with what you want to achieve. The goal could be to avoid accidents/injuries/fires, for example, or to achieve happiness or some other positive goal.
Start by setting a goal. To achieve it, you want to avoid risks that might hinder you, obviously, but you also want to find the opportunities that will facilitate your journey. By working with risk management correctly, you will develop an understanding of both the challenges and the opportunities that you might encounter along your way.
The process for risk management consists of six steps: setting the scope, identifying risks, prioritizing based on consequence and probability, control, following up and starting over.
Here are a few tips that will help you establish an effective process:
- Always connect the analysis with a goal.
- Ensure that you get input from different perspectives: machine, human, and environment.
- Decide what the meaning of consequence and probability are in this particular case before you start the analysis.
- Get the right people involved in the analysis.
In every case, risk management creates an opportunity to discuss, create unity and establish the team’s commitment to what you want to achieve. It also provides clear and straightforward support for decision making, which makes it easier to say no when necessary, with a rational motivation to back up the decision.
Today I know that risk management is my thing. It helps me to keep on daring to invest in new creative solutions and explore new ways of working. It has also made me a better leader with a clear direction and the ability to prioritize with confidence.