Is Risk Based Thinking always a good thing?
I recently spent some time with a company that reminded me of an organisation I was involved with years ago. They prided themselves in integrating their management systems into the fabric of their business – an aspirational goal for most companies and the closest thing I have to a soap box topic. So, what was the problem?
Well, in the earnest implementation of Risk Based Thinking, a guiding principle of ISO management systems, I got the distinct impression that the concept had crept closer and closer to risk avoidance as an absolute.
And it wasn’t necessary.
This wasn’t an industry that had no ability to cope with errors or limited failure. By taking no risks, or very limited risks, I felt opportunity was being left on the table – avoiding the risk of failure by not participating rather than try and potentially fail. Maybe I’d jumped to an incorrect conclusion but we did have a really constructive conversation about the ‘Risks’ of an overzealous and often misunderstood use of Risk Based Thinking, such as;
Overemphasis on Risk Avoidance: If an organisation becomes overly focused on avoiding risks, it may lead to a conservative approach that stifles innovation and growth. Taking calculated risks is often necessary for progress and improvement.
Paralysis by Analysis: Excessive analysis of potential risks can lead to decision paralysis. Organisations may spend too much time assessing risks and creating complex risk mitigation plans, slowing down their ability to make timely decisions.
Neglect of Opportunities: In the pursuit of risk mitigation, organisations may overlook potential opportunities. Risk-based thinking should also involve identifying positive risks (opportunities) and taking advantage of them to improve performance.
Bureaucracy and Documentation Overload: If the risk management process becomes overly bureaucratic and results in excessive documentation, it can lead to inefficiencies. The focus should be on practical and effective risk management rather than creating unnecessary paperwork.
Failure to Adapt to Change: Organisations that are too risk-averse may resist change, hindering their ability to adapt to evolving market conditions and technological advancements. Embracing certain risks is essential for staying competitive.
Lack of Employee Engagement: If employees perceive risk management as a burdensome process rather than a collaborative effort, it may lead to disengagement. Involving employees in the risk identification and mitigation process can enhance its effectiveness.
To avoid these issues, organisations should strike a balance between risk management and their overall strategic objectives. Risk, after all, can be positive. They should foster a risk-aware culture that encourages innovation, continuous improvement, and the ability to adapt to change while still managing and mitigating potential risks.
iqms Learning can help you find the balance that’s right for your business.
Contact us at enquiries@iqmslearning.co.uk or click here.