Harvard Business Review’s right — financial risk management is tough at the best of times. The current crisis at the banks gives us a painful demonstration of what happens if businesses play with fire.
Risk management can become the business equivalent of sorting out your life insurance cover. Once you’ve completed the requirements and put a policy in place to ensure the continuation of all you hold dear, you sleep soundly in the knowledge that your life is in order.
But you don’t revisit your plan very often — or you ignore the warnings, as the banks did. If the risk managers start to get assertive, fire them for their negativity and their unfortunate habit of getting anxious.
I like the natural trustworthiness you find in the risk management business — people who tend to resist change and who need to understand the full detail of situations. They bring a needed discipline to the workplace.
Their reticence makes others explain exactly how a proposal will work in practice and demands that they get to the simplicity that comes from real understanding rather than convenience.
Most businesses have these people somewhere — they lean towards audit, health and safety and quality, but they can be anywhere. They tend to have worked for the business for a long time, know how things really work and won’t want to change employers unless you really hack them off or they feel more strongly about their chosen profession than any single organisation.
Clearly these are also the people who can drive me to distraction when implementing new ideas. I dare say the feeling is mutual.
It’s better to combine our intelligence rather than to argue who is right or pull rank, so that change management plans now include how to move forwards with the right balance of risk and return
Business is full of tough ethical decisions. Would I have been brave enough to be the first banker to say: “We’re going to pull back because our business is built on sand that may shift” — especially knowing that conversation alone might be enough to move the sand? I’d like to think I so, but I will never know. This much I can predict: the current crisis has increased the odds of us all being braver about unacceptable risk.
