The single thread in nearly all of these cases is simple — the conditions changed and the organisation failed to keep pace with that change.

When thinking about the most significant business risks facing an organisation, failing to keep pace with change is the biggest. It outstrips anything on your risk register. It is a death sentence waiting to happen.
In some cases the decline will be rapid, but in many cases, without a big intervention it will be slow and painful. Other risks will hurt; they may cause embarrassment, legal recourse, short-term financial loss, or the loss of a few executives, but they probably won’t kill the organisation.

The most recent analysis from the ASX Corporate Governance Council tells us that 95% of the ASX 200 companies believe they have the systems in place for their boards and management to be across their most material business risks.

In reviewing the risk reports from of a range of organisations, we see that the most material business risks — the risks arising from external change — are often not explicitly stated or well understood.

In part, this is due to narrow time horizons used in framing their risk assessments. In part, this arises from being unable to distinguish weak from strong signals. In many cases, it’s an inability to think beyond business as usual.

Often, the only way to tackle a strategic risk is to take a big risk and change course. Many organisations shy away from this and, in doing so, will end up on the scrap heap.

While it is risky to change and adapt, not hedging your bets is even riskier.

Ironically, for many organisations, a conservative approach to risk in the short term is likely to be the greatest risk of all.

Three questions you should ask:

• What could cause our business model to be defunct or unviable?
• What weak signals do we need to be paying attention to today?
• What risks are apparent now which could take several years to unfold?

This article first appeared in the December 2011 edition of Risk Management Today.   Part two of this article is linked below.

2012 Prophecy – The End of the Industrial Age

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The good folks at Lexis-Nexis have been kind enough to invite me to be on the editorial panel of their new magazine Risk Management Today, and to have the lead article in the inaugural edition.  They’ve also been kind enough to make this article available free of charge to my clients and readers for a limited time.

The article aims to get beyond the literature and standards, and give insights on some of the key things to look for when assessing the adequacy of an organisation’s risk framework.  It is pitched at those who are not necessarily experts in risk management per se, but rely heavily on an organisation’s risk management framework.

Key points

• Despite organisations making significant investments in risk management, they still fall short in dealing with disruptive change.
• Regulatory changes seem unlikely to get to the heart of what really matters in avoiding significant destruction of shareholder value in the future.
• Seven key areas of risk management areas are discussed that investors, boards and the C-suite should be looking for.

Please feel free to download the article and pass it on.

Download the article (pdf, 3 pages, 86kB)

Also this publication is shaping up to be a very good one, and I’d encourage you to have download the inaugural issue and have a look (free download for a limited time).

Todd

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Can your organisation continue to prosper as conditions change?

Organisations are facing greater challenges than ever before.  As a leader if you feel that you are facing more change than ever before, you are not alone.  The nature, scale and frequency of change is increasing which is putting tests on the resilience of all organisations.

Increasingly, the term resilience is popping up with a number of variants – enterprise resilience, organisational resilience, business resilience and others.  Some variants are narrow dealing only with a part of the problem.  Resilience from a HR perspective often talks about personal resilience – in other words, the ability of an individual to bounce back in the face of adversity – something akin to personal tenacity.  Resilience from a risk perspective is often limited to business continuity or crisis management.  Both models tend to plan for and react to disaster rather than empowering organisations and leaders to navigate strategically.

TDA takes a holistic view of resilience using the models embodied in the Resilient Futures Network models to answer the simple question for leaders – “How can we continue to prosper as conditions change?”.  Our models bring together the key aspects of strategy, risk, governance, leadership and assurance to allow for organisational resilience and transformation.

We can assist in a range of ways depending on the needs of the organisation with a range of modules and entry points including:

• Primer – introduction to the concepts of resilience and and understanding of why this is business critical and a potential source of ultimate competitive advantage for your organisaton
• Initial diagnostic – initial assessment of key conditions and capabilities required
• Strategic risk assessment – a deep understanding of emerging conditions, key depedencies and how this will affect the organisation’s business model going forward
• Resilience capability assessment – does the organisation have embedded resilience?  What maturity level is the organisation at now?  Where does it need to be?
• Catalytic projects – demensioning catalytic projects to transform the organisation
• Resilient leadership – training leaders within the organistation on key capabilities to allow for organisational transformation
• Program and project management – ensuring what needs to happen does actually happen

After nearly 20 years working in risk and organisational transformation roles I’m convinced that the next five years will be the most disruptive we are likely to see for a generation.  Those who understand and embrace the concepts will be incredibly well placed to create shareholder wealth and outcomes for their stakeholders.  Those leaders which don’t get their head around resilience are likely to preside over  significant value destruction and be the case studies for poor governance of the future.

For a briefing, please contact Todd Davies on (02) 9043 1719.

Need more information first?

Read Todd’s latest articles on the Resilient Futures Network which demonstrate how key events are unfolding today and how outcomes could be different by embracing organisational resilience.

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The presentation was delivered at the NSW ACL user group forum to a group of data analytic and IT audit experts to give them some insights into what the future might hold.

One of the key insights from the presentation is that predictive models now hold less certainty and that 1 in 20 year company transforming events are now looking like 1 in 5 year events, potentially with greater force than previously. 

There are a number of things that can be done about this in terms of creating opportunities and preparing for change based on information in this slide deck, but perhaps a more important theme is the need to create dynamic and flexible organisations which can anticipate and cope with the extent of change that will become even more a fact of life.  Those managers and entrepreneurs who are able to do this will be the winners in the decades to come. 

Watch this space for related discussions in resiliance theory, 21st century capability, open platfrom innovation systems and related topics, or better still, read Larry Quick’s work at http://www.newcommons.com/.  Larry is our man for future thinking and has an amazing tendancy to predict things like the internet and climate change 5-15 years before they reshape the planet.  We are great fans of his provocative and insightful thinking and proud to have an alliance with him.

For a copy of our presentation from the TDA conference, click here.

Postcript

Larry and I are now partners in Resilient Futures.  Resilient Futures is a group of strategists, urban planners, environmentalists and a range of other practitioners who are using resilience thinking as a model to develop resilient organiations.  I’m very excited about this work, and encourage you to find out more at http://www.resilientfutures.org.

If you downloaded the futurecasting presentation and find it insightful, then you’ll want to subscribe to the Resilient Futures newsfeed.  Just follow the prompts on the RF website.

Note: Larry assures me that he is not a futurist, but what I do know is that the Resilient Futures model has an uncanny predictive capability that I do not normally see in risk, scenario planning or policy environments.

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• Clarity and unity of vision and sponsorship by internal stakeholders
• Clarity of responsibility between the various assurance, risk and compliance functions
• Efficiency in delivery
• Optomisation of risk and assurance coverage
• Increased risk-sensing ability
• Streamlined implementation with minimal false-starts

In short, bigger bang for buck and more engaged and satisfied stakeholders.

Please click on a link below to find out more about the type of work we typically get involved with.

Vision

• Vision setting
• Benchmarking
• Internal audit self assessment
• Enterprise governance framework

Enabled by High Performing Teams

• The Virtual Chief Audit Executive
• Getting the most out of internal audit sourcing
• Coaching for rising stars
• Getting the right staff on board

Powered by Leading Practices

• Internal audit transformation
• Audit committee best practices
• Assessing the adequacy of your risk framework
• Understanding GRC software solutions
• Strategic risk and emerging risk capability
• Stress testing your risk profile
• Compliance with the ASX Corporate Governance Council Principles and Recommendations

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