How CEOs can mitigate compounding risks

When risks combine, the cumulative impact can have existential consequences. But leaders can prevent compounding risks from sneaking up on them by adapting risk processes to manage multiple threats.

Uniting Strategy and Risk Management to Seize Opportunity in Uncertainty

Today’s more uncertain environment calls for newer, more dynamic approaches to risk management and strategic planning. Successful companies foster a culture of strategic humility, anticipatory preparedness, and a willingness to act to own the future as it unfolds. And they have four critical characteristics:

  • They see risk as a two-sided coin with challenge on one side and opportunity on the other.
  • They explore the strategic implications of

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Building resilience in a polycrisis world

To stay operational, even in the worst of times, focus on what matters most. It will change your risk culture.

Ulrich Pidun, Sebastian Stange

Understanding the underlying risks should be a particular focus in project selection. Research has shown time and again that human beings are weak at risk assessment, but some techniques can help. A good starting point can be to frame the discussion in terms of a base question: What do we need to believe in to make this an attractive investment? This framing can help uncover … [ Read more ]

The Art of Risk Management

We worry that in their headlong embrace of formal systems of risk management, many companies are pursuing a highly technical approach to risk management—characterized by complex financial models and elaborate, formal risk-management systems—in isolation from the day-to-day activities of the broader organization. The result is that risk management may exist as a formal function, but it is not really embedded in the “mindset” of the … [ Read more ]

How Firms Can Overcome the ‘Paradox of Preparedness’

When major threats are looming, but their timing is uncertain, it’s hard for business leaders to make an action plan for dealing with them. Wharton marketing professor emeritus George Day and global management consultant Roger Dennis call it “the paradox of preparedness.” In this essay, they offer four steps to help leaders heed the warning signs of disaster before it’s too late.

Forget Dumb Luck – Try Smart Luck: Strategies to Get Lady Fortune on Your Side

Most people view luck as the opposite of determinism, control, or strategic intent. But because we can often influence situations in which chance plays a role, these forces are actually linked. The first challenge is to reframe your views about luck and realize that it usually entails much more than random chance. Yes, the primary force behind luck is the way that probabilities play out, … [ Read more ]

Simplifying Cybersecurity

Have our institutions become too complex to secure?

The Disaster You Could Have Stopped: Preparing for Extraordinary Risks

Ignoring high-consequence, low-likelihood risks can be damaging to an organization, but preparing for everything is impossibly costly. Here is how leaders can make the right investments.

Chris Bradley

We have to reengineer how we evaluate people, particularly in risky contexts. Rather than “you are your numbers,” take a holistic performance view. How do we make sure noble failures get rewarded and dumb luck does not?

Chris Bradley

Dan Lovallo is a professor who works in applying psychology on biases to management topics. A simple test he did at an investment bank showed that if you applied the CEO’s risk tolerance to all the investment decisions made at lower levels rather than the more junior decision makers’ risk tolerance, the decisions would have had a 32 percent better outcome. So, there is this … [ Read more ]

First Round Review

What most crisis communication systems neglect is closing the loop with colleagues in the same careful manner as they do with their customers.

Krista Berlincourt

If luck is what happens when opportunity meets preparation, a crisis is difficulty meeting unreadiness. You can’t avoid every iceberg, but you can add a few more safety boats.

Warren Buffett

A Russian roulette equation — usually win, occasionally die — may make financial sense for someone who gets a piece of a company’s upside but does not share in its downside. But that strategy would be madness for Berkshire. Rational people don’t risk what they have and need for what they don’t have and don’t need.

A 6-Part Tool for Ranking and Assessing Risks

CARVER is a system for assessing and ranking threats and opportunities. Developed during World War II, CARVER (then one letter shorter and known as CARVE) can be both offensive and defensive, meaning it can be used for identifying your competitors’ weaknesses and for internal auditing. In addition, many security experts consider it the definitive assessment tool for protecting critical assets.

Since it draws on both qualitative … [ Read more ]

How to Use Thought Experiments to De-Risk Your Startup

In the early days of building a company, it’s hard to step back and think about the bigger picture when there are always so many fires to fight or opportunities to chase down. That’s a shame, because looking at your business from a 50,000-foot view often reveals areas of misplaced focus or resource misallocation.
 
One technique that can break through the bubble of always being in … [ Read more ]

Julie Goran, Laura LaBerge, Ramesh Srinivasan

The critical question for executives concerned with their organization’s risk appetite is whether they are trusting their employees, at all levels, to make big enough bets without subjecting them to red tape.

Lower Your Startup Risk with this Template

After watching other founders – including myself – flail about, pivoting their way through the darkness, I’ve become obsessed with being more systematic and disciplined about entrepreneurship. So I decided to take Leo Polovets’ lead and standardize risk management into a single spreadsheet, which you can copy, download, or remix.

Sanjay Kalavar, Mihir Mysore

In our experience, it helps to think of a crisis in terms of “primary threats” (the interrelated legal, technical, operational, and financial challenges that form the core of the crisis) and “secondary threats” (reactions by key stakeholders to primary threats). Ultimately, the organization will not begin its recovery until the primary threats are addressed, but addressing the secondary threats early on will help the organization … [ Read more ]