Most organisations would say they manage risk well, but mostly they manage the obvious risks well. They review risk once a year and create and monitor a perfectly respectable risk register. What they often fail to consider are the big risks, the unthinkable risks, the expensive existential risks. The sort of risks that come with a global pandemic, or the discovery that your product does not work, or that the field employees in your charity have been abusing those they claim to aid. Yet these risks are predictable, they happen, but they are very hard to think about. If you are running a business, you must think about these risks and take action. The “bury your head in the sand” strategy may work for ostriches but its not a recipe for business success.
At Defy we use a scenario planning approach with our customers. It’s a proven technique, it can unearth both opportunities and threats and it can expand peoples' horizons as they start to create scenarios for the future. This is an exercise that should be done at all levels in the company, not just the Board or the Strategy team. It is where you really need diverse thinking, and that means real diversity in age, gender, ethnicity and background.
Begin by creating a base case where things happen much as already planned, but beyond that create scenarios of what might happen and what threats and opportunities might develop. Do not be afraid of going to extremes in your scenario building – life has a nasty habit of delivering extremes. If there isn’t at least one scenario where your business becomes untenable then you’re really not trying. Once you have your scenarios then you need to think how to change your business to reduce your downside risk and capitalise on opportunities. You may decide that you cannot afford to take all the defensive measures you might like but at least you are acting from a position of knowledge.
Once you have done the exercise then keep monitoring the geo-political and economic landscape month by month and then take the potential effects into account in your planning.