Mike Barnato

A queue for risk

The Treasury plan to remove the 100% guarantee on Northern Rock is a reminder of the enduring impact of poor risk management in banking.

But risk is the flip side of opportunity. If we wanted to avoid all risks, no ship would ever leave port. So organisations have to manage risk.

But the traditional approach – identify risks, assess likelihood, evaluate impact, identify actions – often neglects wider people and strategic issues.

Here are some of the problems and solutions I’ve come up with when reviewing risk management procedures and projects in the public and private sector:

• A new organisation had a good list of necessary actions to manage risk. But it was not being implemented. I turned it into a project with monthly reports to the Board.
• Staff were too frightened, of being shot as the messenger, to report risks truthfully. This is common. I have tried telling the CEO directly, creating a forum for staff to do so without blame and when time permits, have changed the underlying culture.
• The Board couldn’t get a grip on the transformation programme because they were swamped with long reports. I wrote an eight page summary, with two internal staff , concentrating on the key elements - a programme initiation document.
• The team in a caseworking organisation hadn’t  considered the impact on reputation of several risks materialising at once. Together, we developed a way of managing legacy cases that mitigated this danger.

When I’m delivering projects, I aim to manage by pulse beats, not by post mortems. This means keeping a finger on the pulse, being alert to warning antennae and acting before issues become problem, rather than trying to work out why the patient has died.

As Rosabeth Moss Kanter, a professor at Harvard Business School said, “The challenge is to learn to dance on a shifting carpet, rather than seeing the carpet pulled out from underneath.”

Captain Chesley Sullenberger, the pilot who successfully crash landed on the Hudson River after colliding with a flock of geese, is a good example. The captain saved 155 passengers lives by being prepared (he had studied past water landings), and confident enough to make the snap decision to land on water. And to write a book about it.

Picture by Dominic