If a CEO wants his organization to realize the opportunity presented by risk management to deliver better decisions and, through them, improved performance, he needs to do more than “walk the talk.”
I have come up with the phrase “embrace and embody” risk management. (Feel free to borrow it.)
Get Everyone on Board with Risk Management Thinking
The idea is that not only does a leader have to say the right things and demonstrate desired behavior himself, but he must demand the same from his direct reports -- so that the desired behavior of embracing and embodying risk management cascades down and across the organization.
People have been asking the question “what could go wrong” to identify risks. To this should be added the question “what needs to go right.” This second question makes a manager really think about risk in a different way and will, in my opinion, work better than the first.
An effective manager needs to ask himself and his team these two questions every time they need to make a decision: “What needs to go right and what could go wrong,” followed by, “what are we going to do about it?”
A disciplined decision-making process that asks and answers these questions is much more likely to succeed than relying on instinct and experience.
When an executive or board member receives a proposal or other request for his approval, he should demand that these questions have already been asked and the answers included in the information he receives. He should demand this risk management thinking from his team, and demand that they demand it of their staff.
I believe that when the board sets an embrace and embody expectation from the CEO and CFO, the top executives will start to demand the same from their direct reports. In this way, not only does the board embrace and embody risk management thinking, but so will the organization as a whole.
There should be no tolerance for proposals that have not been properly thought through in this way.
What do you think?