The many conversations around Risk Based Thinking is necessary and cannot be overemphasized given the evolving and fast paced times we are in. Risks are indeed ever-present and it pays dividends to think about them before they happen. By promoting a risk-based thinking culture, an organization becomes proactive rather than purely reactive, preventing or reducing undesired effects and promoting continual improvement.
What really is Risk Based Thinking?
Risk-based thinking is a “mind-set to proactively improve the certainty of achieving outcomes utilizing methods that consider threats and opportunities.” (Laqua, 2018). Simply put, Risk based thinking is promoting a mentality of risk assessment and evaluation during operations, when designing a product or process, and even while improving a product or process or when designing a strategy.
The importance of buttressing this mind-set cannot be overemphasized and that’s why the International Organization for Standardization has ensured that the Risk Based Approach is a core element in all the revised edition of ISO Standards. Risk-based thinking can help you prevent losses, capture opportunities and improve communication throughout your organization. It also helps your organization to make better decisions – especially when you are operating in a challenging, fast-paced or otherwise uncertain environment. According to Willumsen et al. (2017), this improved decision making can yield many benefits, including:
- Reducing frequency and likelihood of losses
- Reducing costs of losses
- Improving response time to unexpected events
- Reducing stress
- Improving communication
- Enhancing organizational learning
- Capturing new opportunities for growth and improvement
Addressing risk is far more than an assessment or management exercise, the time spent contemplating, finding, and dealing with risks also helps your team learn about the organizational processes and fosters bonding and communication.
How then do you ensure your organization is not only paying a lip service to risk? How can you integrate risk-based thinking into your organization’s culture? Some tips include;
- Continuously engage internal customers (employees) in risk identification and management.
- Identify what the risks and opportunities are in the context of your organization – ISO 9001:2015 will not automatically require you to carry out a full, formal risk assessment, or to maintain a risk register but it will require you to identify risks and opportunities and establish adequate controls.
- Integrate risk management into design and development, rather than making it a separate activity performed by a risk management team. Risk based thinking is everybody’s business!
- Adopt agile processes that will help you reduce risk. For example, incorporating close, continuous communications between designers, developers and customers reduces the chances of developing or delivering the wrong thing.
- Keep records of how risks change after you implement corrective actions or improvement plans. This will not only provide information about the effectiveness of your efforts, but it will also demonstrate that your organization is incorporating risk into decision making and evaluation of results.
- Reward people for cooperatively identifying and responding to risks.
- Prioritize activities with risks in mind.
It is important to note that Risk based thinking is not a cure-all for everything that bedevils your organization. For example, if your business faces competitors in a saturated market, it may be enough to just notice the problems in front of you. However, ignoring potential risks is not the way to get ahead either, but this mind-set enables you to consider what problems lurk below the surface and you’ll be ready to face them if they do appear.
According to Michelle Bangert, “If done well, risk-based thinking is ongoing, practical, personal and involved. It is a hands-on way of addressing challenges before they escalate. Being proactive rather than reactive can mean the difference between a calm discussion and a barked order. In this way, the risk of failure can propel companies forward…”
Succinctly put, it is time for Risk Based Thinking!