Do You Have A Healthy Risk Appetite?

by Janice Giannini

With a deep mastering at the intersection of IT and business strategy, consultant, board adviser and former C-suite executive, Janice has been harnessing the true power of IT for more than 30 years. An Executive and Board-level digital strategist at the intersection of risk and IT, she enhances competitive position through vision and equity with large-scale risk identification, quantification and mitigation in an ever-changing marketplace, generating long-term value for clients. She engages with senior executives and teams, particularly in complex businesses where misalignment is blocking their desired success, to develop and execute practical business strategies and plans. Clients have found her especially helpful when they recognize they must integrate an eagle's eye and worm's eye view in order to identify and remove obstacles. Janice has consistently taken on those challenges that others chose to run from. This typically involves those challenging times when failure is not an option and integrating business, technology and people changes must be accomplished simultaneously. As a result, many of her clients are complex organizations who won't settle for anything less than developing widespread professional competence.

It has often been said that it's not the problems you know about that get you into trouble, it's what you think you know and don't, that is the issue. So how can you unlearn what you think you know and may not?

I invite you to consider that statement through the lens of the overall risk your company or organization is taking. A necessary question directly related to achieving your personal and company goals or failing to do so is "do you understand the risk you are taking and the overall impact of that risk?"

In today's world your risk profile is markedly different than even a few years go. For example, I recently attended a Board-of -Director Forum; it is increasingly clear at the Board level that understanding risk, especially ubiquitous technology risk, is a critical factor for success.

The complexity of the world drives that concern. For many, growth will come through more effective leveraging of technology and putting more responsibility on leaders to understand and manage it. Boards are simply leading/reflecting the realities that all business leaders need to address.

As a company leverages technology to create innovative solutions and a competitive edge in their marketplace, what are the circumstances that can present themselves as risks? And which ones really matter?

So, here's today's quiz. Take out a blank piece of paper and draw a line down the middle. It is up to you whether you choose to do so horizontally or vertically. At the top of the left hand column write the word 'concerns'. At the top of the right hand column write the words 'what to do'. Use as many of these sheets as you need; after many years in industry, I opine that the more sheets you use, the more comprehensive your analyses will be.

As you look at your business, under the heading 'concerns', record all of the things that concern you. I recommend that you refrain from judging the quality of what you are thinking, simply record all of your thoughts.

Now, go back to the heading 'what to do', and answer the question what would you do if that concern turned into reality. Again I recommend that you refrain from judging the quality of your thoughts, simply record them. In many cases, you may not have a response and that's okay for now. It's more important to reflect as objective a situation as possible, than to pretend to have all of the answers at the outset.

Why did I ask you to write the word concern versus risk? Typically humans will be more open to speaking about concerns because we all have them. When we use the word risk, all of a sudden, our instinct is to minimize the list to show we understand our environment. I offer this lens as one way to begin to unlearn what you think you know and don't. As an aside, while I apply this technique to your business, it works equally well for personal and other situations.

It is no longer a viable strategy to be risk adverse. There is a strong relationship between risk appetite and innovation and growth. The successful companies understand their real risk appetite and actively discuss whether their willingness to take risk and their ability to manage that risk is in alignment.

Working with businesses over the years, I have found that the more complete the concerns list is, sets the stage for answering the following questions; which in turn leads to stronger innovation and growth.

  • how comfortable are you that you captured all of your collective concerns
  • how comfortable are you that you can prioritize these concerns into a plan of action
  • how comfortable are you that you openly discussed potential solutions to address these concerns
  • how comfortable are you that you are not unknowingly sweeping something under the rug
  • what else do you as a team need to do to discuss the reality of the alignment between willingness and ability to manage the risk if it
  • happened.

If this exercise is too difficult for the team, please consider that your risk is uncontrollable because you don't know what it is. If this exercise takes you 5 minutes with little or no controversy, I ask you to consider are you innovating enough to grow or are you in the initial stages of going out of business?