Risk Management is something I get asked about because of the name of our consulting firm, and of course it’s a subject that matters a lot to me and our clients.
To give you a quick definition, Risk Management is a process for organizations to identify, rank, track, and monitor their risks. Risk Management programs are about facilitation, information collection, and reporting to give transparency into the risks facing the organization and discussion about what to do about them.
Risk Management is characterized by its tools – matrices, heat maps, frameworks, PowerPoints, workshops, surveys, and ever-more complicated models, systems, and the analyses of quants.
But let me tell you the best risk management tool I have ever heard. It comes from Dr. Karen Hardy, the former Deputy Risk Officer for the U.S. Department of Commerce, author of Flip This Risk, and host of podcast Flip This Risk who I heard speak at a conference.
Hardy recounted her journey to implement a risk program for the Department of Commerce. She first tried a compliance program where she asked people to follow requirements. Next, she tried a fancy risk dashboard. And then she tried cutting-edge risk management software.
But none of these tools worked. So, she tried a final tool that proved the most effective: a cup of coffee.
The results of her “cup of coffee” approach demonstrated that one-on-one connections reaped the best information for her risk program. These intimate conversations allowed people to share what kept them up at night and gave more value than any matrix or software solution could provide.
This is a powerful reminder to risk professionals and others in the corporate world who thrive on data, models, matrices, or complexity in general. Our best tool is often our simplest.