As economic and reputational pressures on companies grow, the ability to master risk is becoming a critical and differentiating skill. In this blog, we’re going to unpack exactly what we mean by risk mastery, why it’s so important, and how your organization can get better at it.
The profile of your risk culture is created by how your people are encouraged or discouraged to take risks, to manage risks, and to recover from mistakes. This culture influences your day-to-day decisions, and the risks people do and don’t take. Your organization’s processes, attitudes, and leadership behaviours create and reinforce this culture every day.
Risk mastery is the systematic anticipation, evaluation, and mitigation of the risks associated with your business decisions (strategic and operational) in a way that enables you to grab more opportunities safely. It is about consciously and routinely taking ownership for risk so that you are:
In our extensive experience, most organizations don’t do risk mastery. As a result, one of two eventualities happens:
Risk mastery, then, is about removing extremes. Organizations who are driven by fear of failure are too cautious and risk-averse. Companies who are cavalier are ignorant of risks and run headlong into them. By embracing the concept of risk and automatically considering it as part of their day-to-day activities, organizations can achieve bigger goals, while reducing the chances of self-sabotage.
There are several reasons why risk mastery is becoming increasingly important, including:
The news these days is littered with examples of companies who did not anticipate, evaluate, or mitigate the risks associated with their decisions and activities. Reputations take years to build and seconds to tear down, and in an age of heightened scrutiny and viral media, your market value can be wiped out overnight simply by failing to properly consider risk.
By adopting a risk mastery mindset throughout your organization, you can minimise the likelihood of anything going wrong (and impacting your reputation), but if it does, you will know how to adapt quickly to address the situation. You will also learn from the event, so you don’t repeat mistakes in the future.
In an unstable global economy, organizations are under more pressure than ever not just to deliver, but to do so consistently. With rising economic uncertainty, investors and shareholders want reliable returns, and this is becoming harder and harder.
If your organization consciously considers risk, you can stretch further, entertain greater possibilities, and achieve bigger goals more consistently. Through thoughtful risk taking, you can encourage more innovation, empowerment, and generate amazing results. Where others may not grab an opportunity because they see it as too risky, you will be able to capitalise on it because you have mastered the associated risks.
The power of risk mastery comes from the fact that by being prepared, your people will have greater confidence in execution, and can respond rapidly to recover (or even improve a situation). They will not blame outside circumstances when things go wrong, but rather look to their own risk anticipation skills, and whether they could have mitigated better against this possibility. They can also take advantage of new opportunities, and there is more predictability to their results.
In our experience, because most organizations don’t do risk mastery well, they either fail to hit their goals consistently, or they set their sights too low and don’t achieve their full potential. With heightened pressure to perform consistently, risk mastery can be the fuel that drives the superior, reliable performance that rockets your share price and differentiates your business.
Risk mastery is a skill, and like any skill, it requires repeated practice to get better. At Walking the Talk, our Risk Mastery offering focuses on three practical steps, and three associated mindsets.
Mindsets take time to shift, and that starts with changing beliefs. These are the beliefs we seek to change through our work.
As with any new habit, it needs to become a regular part of your routine to create sustainable change. By focusing on these mindset shifts and practical activities, you can start to build risk mastery into your culture.
As the world gets ever more volatile, external risks to organizations are only going to multiply. Whether it’s inflation, war, climate change, or something else, these types of risks are hitting companies daily, and not enough are doing the appropriate amount of anticipation, evaluation, and mitigation.
Internally, remote and hybrid working pose challenges to innovation, creativity, and collaboration, the influence of AI is spreading and deepening, and business planning cycles are shortening. People are looking to their organizations for reassurance, support, and inspiration.
So instead of shying away from risks, or careering blindly into them, companies need to embrace risk mastery and create cultures that reward conscious risk taking. The prizes for doing so are great, and the costs of not doing so are heavy.
What type of risk culture do you have?