Aligning strategy and risk in a disruptive world
At the board table, strategy and risk have long posed essential questions to be considered together:
- Where are we going?
- What might stop us getting there?
Indeed, the idea that the risk and strategy disciplines should work together is not new. What has changed however is the velocity, variety and volume of questions being handled. This is what I will discuss with fellow panellists Kellie Benda, Former Chief Risk Officer at Origin Energy; and Deloitte Director David Hitchcock in our panel discussion Strategy and risk, how do these disciplines work together in a disruptive world? at Governance Institute’s National Conference on Monday, 4 December.
But let me start at the beginning. My journey aligning strategy and risk began in 2001 when I was the Bank Strategist at AMP. Fortunately, I started in the role at roughly the same time as the bank’s Risk Manager and we were seated next to one another. As I tried to get my head around the bank’s strategic landscape, I recorded my thinking on a whiteboard hung next to my desk. In a short time, my desk buddy began making contributions — questions to consider, papers to read. It became clear to both of us that we added greater value to the organisation when we — strategy and risk — puzzled things together.
Today, at the board table, it’s a similar scene. Typically, boards handle the more complex, ambiguous, multi-faceted questions facing the organisation. And teams — be they board or management — with diverse perspectives, insight and decision-making models are better equipped to address these challenging questions. Strategy and risk. Risk and data. People and technology. The possibilities to create value though breakthrough ideas, smarter decisions and strengthened performance are unprecedented. The challenges and risks; disruption-sized.
Boards have to drive sustained change for continuous transformation and organisational agility
Two experiences particularly drove this point home for me. In the late 90s I was in a head of operations role in banking. Digital banking had arrived and COO and CIO roles were converging. Delivering a great customer experience required people and technology to work in concert. Operational risk management required IT knowledge as much as people and process. It was an exciting time of re-thinking traditional operational models and ways of doing things; continuously improving and learning. Much of the old operations manager toolkit — Total Quality Management, Lean Manufacturing, Process Improvement — still applied. What was different was the speed of change. The conversation of the day was about continuous improvement and organisational change management.
Then in 2002 transformational change became my life. I left the secure world of indentured employment and created a start-up consulting business focused on helping organisations achieve transformational-sized change. My point of difference was that we built organisational change capability while delivering a project. My evangelism of learning while doing and building a sustainable capability over time can be traced back to those days.
Today in my board work, I continue to champion the need to build organisational capability and agility while achieving the performance goals of the day. Delivering stated performance goals is a core requirement of every board. But boards also need to be future ready. We must play our part, along with strategy, risk — indeed all of management — to build an organisation that is match-fit for the challenges ahead. That is an organisation that will not just survive but thrive in today’s disruptive world.
Ensuring diversity goals link to risk management, particularly in an organisation’s preparedness for disruption.
Given the complex, multidimensional risks that organisations confront today, arguably there is no strategic goal more important than increasing the diversity of teams that manage these risks. Of course, improving the range of perspectives, ideas and insights available to face into these challenges also means that leadership, problem solving and ways of working together need to be extended to take advantage of this broader perspective and experience set.
Juliet Bourke says it best in her book Which two Heads are Better than One? about how diverse teams make smarter decisions. She challenges boards and executive teams to think differently, and in a more disciplined way. The book prompts significant reflection, in particular:
- Are we diverse enough?
- Do we have the right leadership?
- How schooled are we in different approaches to solving problems?
- Do we have the humility to consider new ways of working together?
- Do we have any choice in today’s volatile, unstable, complex, and ambiguous (VUCA) world?
'No one person can see it all, know it all, do it all,' says Bourke. I couldn’t agree more.
I look forward to meeting you at Governance Institute’s National Conference on Monday, 4 December. It will be a great session. No risk!