Thinking about Risk: Taking or Avoiding Risks is a C-Suite Imperative!

Thinking about Risk: Taking or Avoiding Risks is a C-Suite Imperative!

“…risk is a reality and you have to think about how to position the organization to take advantage of the opportunities,” says Peter Zaffino, CEO of Marsh, LLC, on the front page of The Wall Street Journal’s May 31, 2016, “C-Suite Strategies” section.  Mr. Zaffino is also quoted as saying that “Risk isn’t a negative.”  While taking risks can absolutely be a positive—a business imperative, actually—it can also be a negative.  Most importantly, risk should be considered strategically and tactically, and absolutely in the context of the enterprise taking the risks.

The International Standards Organization’s treatise on risk management defines risk as the “effect of uncertainty on objectives,” specifying that an “effect is a deviation from the expected” and that an effect can be positive or negative. [ISO 31000:2009]  Positive or negative… the positive outcomes from risk taking include corporate growth and profit.  The negative outcomes include product failure, financial loss, and reputational damage.  The former are desirable, the latter to be avoided. 

In two upcoming programs that are open to the public, the Manhattanville School of Business Institute for Managing Risk will host industry experts, risk managers, business and nonprofit leaders as they explore these challenges, consider how to embrace risk awareness, pursue “up-side” risks, and mitigate “down-side” risks.

Register now, so you can attend: 

June 7, 5:30 p.m. – Managing Risk in an Age of Uncertainty, co-sponsored with PRMIA

June 15, 8:00 a.m. – Preparing for the Unknown:  Managing Risk in Nonprofit Organizations, co-sponsored with the Manhattanville Nonprofit Management program.

Think about it:  an enterprise—whether for-profit or not-for-profit”—that does not take risks is soon out of business.  A nonprofit that provides health services for the elderly, for example, needs to rent or buy clinic space, hire medical practitioners, establish a record keeping system, among other things all before opening its doors.  Each step carries risks, as well as the overall risk that no clients will appear.  Alternatively, there is also the risk that too many clients will request services and the facility will be overwhelmed, the staff driven to exhaustion.  Similarly, a for-profit company launching a new service or product faces an array of risks, ranging from the operational (production, distribution, post-sales support) through legal (copyrights and patents), financial (funding development, product pricing), and corporate (staff support through HR, accounting, IT, facilities). 

Importantly, strategically, ISO 31000 calls on each enterprise to decide for itself which risks it wants to take and which risks it wants to avoid.   If the nonprofit does not take the risk of opening its clinic, why should it survive?  If a company does not take risks to develop, produce, promote its products, why should stockholders invest in it?  Conversely, of course, unconsidered risks can delay or destroy either endeavor.  Thus, the challenge, the imperative, is to be “risk aware.”  Rather than being risk averse, an enterprise needs to consider and manage its risks.  This isn’t willy-nilly taking risks on new things, but neither is it knee-jerk risk avoidance.