Last week, we held a risk management workshop for one of our key clients. As one of the facilitators, I had to simplify “Risk management” a rather technical term to a non-technical audience. I decided to ask a question.
“Why do cars have brakes?”, I asked.
Initially, it seemed to be an odd question given the certainty of the answer.
One audience member retorted, “So the driver can stop the car”
I nodded and said, “Ok, any other answer?”
My eyes darted around the hall and there was no sign of an alternative answer.
Finally, I said, “Although the answer given is rather correct, there is another perspective”.
“Cars have brakes so that drivers can drive relatively fast! ,” “Strange, isn’t it?” I paused.
“Consider this”, I continued;
- “When a car has stopped (and is parked), breaks provide little benefit (except for the handbrakes)”
- “When driving, without brakes (or knowing that the car has faulty brakes), no rational driver would drive a car fast”.
“From this perspective, one could argue that breaks are not critical for their ability to stop the car but their ability to provide confidence to the driver that he will be able to stop in time, when necessary. This would enable him to drive fast”.
Risk Management simplified?
Therefore, Risk management is less about avoiding risk and more about enabling the organisation to take on reasonable risks in pursuit of its prime objectives. Knowing that risk management controls are in place to mitigate the likelihood of a risk occurring, organisations can move faster towards the attainment of their desired goals. In the same way, a driver drives faster when he’s confident that, should there be any need to stop, he can swiftly and safely bring the car to a stop.
Considerations for your risk department
Like other departments in a company, the risk department must be innovative and evolve with the changing risk profile of the company (including emerging legal and regulatory requirements). This can be difficult to achieve from inside the organisation and that is why it is recommended to outsource the risk management service.
Risk management is central to good corporate governance and everyone in the organization has a stake in risk management success.
Back to the car brakes:
Just like cars need brakes so they can go fast, companies require risk management programs so they can take risks along the pathway to achieving their objectives.
Want to transform your risk management practices?
For CEOs wishing to transform their risk culture, workshops and training programs are a great starting point. Also, top company executives should make sure they communicate the importance of risk management since their tone at the top will shape the risk culture throughout the entire organisation.
To make driving safer, you use the right tools and gadgets. Imagine what the accident rate would be if cars lacked speedometers or highways/roads lacked speed limits. At Summit Consulting, we have given careful thought to risk management and created actionTEAM GRC, automated governance, risk, and compliance tool. This tool makes risk management easier by integrating information and automating risk management processes across the entire organisation.
Mr Change
