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Operational Risk Management 1 – Learning from yourself as an expert already!

04/02/2016 - Enterprise Risk Management Operational Risk

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Operational Risk Management and the wider defined Enterprise Risk Management are often touted as a new concept. While the methodologies and processes employed may have been enhanced in the recent past, risk management is hardly new.

Humans, arising from the instinct for survival, have been using and developing risk management techniques from the beginning of time. The risk management skills, knowledge and capabilities passed onto you have meant that your personal life risk management is extremely well developed. I would argue, so well developed to the point that you are often not aware that you are practicing them.

This series of articles will consider some of those personal risk management techniques and principles how we can use them to enhance the risk management in our organisations.

We will start with Key Risk Indicators (KRIs). 

Your brain is the most powerful KRI system known to man. Think about it! Your brain is constantly scanning the environment by collecting data through the five senses.  Even when you sleep they operate, albeit at a diminished state.  You pick up sounds, feel temperature, smell smoke, see danger and taste stale food to name a few. You collect that information and assess it against your risk appetite, developed to allow you to identify whether the information received is excessive and requires action to be taken. 

Take the simple act of driving. You hear an ambulance siren, received via sound.  Base on volume, sound comparisons in two ears and the Doppler effect, you can determine how far away it is, which direction it is and how quick it is closing on you.  Based on your appetite, you may gauge your indicator to be in amber (raised concern).

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As it gets louder from behind there is point our indicator goes into red. We would usually then cut across to the next indicator, sight.  We can tell using our two eyes (and the rear view mirror), how close it is – again raised concern.  It then goes over appetite into “red”.

We then act, pull over and let the ambulance pass. Once past, the indicators fall to green and off we travel. We do this so well, we don’t consciously think we are doing risk management. It’s just what we do!

Having said that, there is one flaw. Your sensory KRI system is so good it is multi-function. We can also use it to listen to music and write text messages. Doing that while we are driving is the same as switching off our incredible KRI system while pursuing risky activities. Perhaps we should spend more time educating drivers on the functions of this incredible system and they may be less inclined to switch it off next time.

Imagine if we could replicate this capability within our organisations. Developing a corporate set of senses that provide constant early warning indicators of changes in our risk profile and emerging risks. This would provide our organisations with early warnings and give us a chance to manage the risk before it turns into an incident. Prevention is better than cure.

Some of us believe we also have a sixth sense. I tend to see that as my risk / reward decision-making tool – the subject of a later blog.

We should appreciate how good we are at risk management and become more aware of what we do so we can learn good corporate risk management form ourselves. In later blogs, we will consider risk and control assessment, incident management and compliance and what we can learn from how we do this in our personal lives.

In the interim, if you would like to know more about how Protecht can help you realise your corporate risk management potential and build a world class KRI capability, just click the link below:

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