Agility—rare mark of a strong risk culture
Part 2 of a series: Ingredients include mobility, organization, empowerment—and courage
- Written by Dan Borge
- Comments: DISQUS_COMMENTS
In my prior blog post I discussed Vigilance, one of the seven attributes of a strong risk culture. As a reminder, these seven attributes are:
• Vigilance—Being alert to emerging threats and opportunities.
• Agility—Deciding and acting in time.
• Collaboration—Being able to work together effectively on risk issues.
• Communication—Sharing information and ideas about risks.
• Discipline—Knowing and doing what is right from a risk perspective
• Talent—Attracting and motivating people who have the necessary risk knowledge and skills.
• Leadership—Inspiring, supporting, practicing, and rewarding good risk management.
This time I will discuss Agility, deciding and acting in time. Once a threat or opportunity is recognized, the organization must be able to respond quickly.
Agility, not speed alone
There are a multitude of examples where a slow response was disastrous.
• Think of Citigroup, that waited too long to reduce its large exposure to subprime mortgages because its ex-CEO Charles Prince wanted to “wait until the music stopped.”
• Think of the executives of RIM, who dismissed the threat of the iPhone to its Blackberry franchise because they thought that they had plenty of time to react later if the iPhone eventually proved popular.
I am not saying that a quick response is always the right response.
Sometimes a wait and see approach is best.
Sometimes more information is necessary. Sometimes it is best to keep options open. Sometimes haste will cause botched execution.
The point is simply that the organization should have the ability to respond rapidly if that is the best course of action. The agile organization has the choice to either act now or wait, depending on the situation.
How to develop agility
It is obvious that the ability to act quickly is a good thing. But how does an organization insure that it has that ability when it needs it?
It is not easy to develop agility, but it can be done.
1. One obstacle to agility is the fear of being first to move.
Some organizations habitually follow the lead of others. This is not always a bad strategy. But if that is the organization’s only strategy, then it is a lemming and agility is impossible.
Agility requires the courage to be out in front—when that is what it takes.
2. Another obstacle to agility is the inability to mobilize, organize, and empower the right people to take the necessary actions.
The organization wants to act quickly and effectively, but it cannot rouse itself to do so.
Internal political fights may prevent the formation of the right team with the right authorities.
Or skew the decision-making process toward factional interests rather than the corporate interest.
An ingrained bureaucracy can block or delay necessary actions. Agility requires that top management be willing to override powerful internal politicians who want to hog the limelight or try to advance their own agendas at the expense of the corporate agenda.
Bureaucrats must be prodded to act or be bypassed.
3. Perhaps the biggest obstacle to agility is lack of practice.
Symptoms of this condition:
• There is no organizational muscle memory based on prior experience with rapid action. Even when the spirit is willing, the flesh is weak.
• People simply do not know what to do or how to do it.
Cures for this condition:
• Even though the Titanic was believed to be unsinkable, they should have been doing lifeboat drills as soon as they pushed off from shore.
Even in the absence of real events to respond to, top management should see that war games, simulations, drills, and other “what if” exercises take place frequently so that the organization is not frozen in the headlights when a crisis or major opportunity appears.
• Well-developed contingency plans for foreseeable events can often be quite useful for unforeseen events.
Preparation for the long foreseen Year 2000 computer problem undoubtedly left banks much better prepared for the operational crisis caused by the 9/11 attack.
As Louis Pasteur said over 100 years ago, “Chance favors only the prepared mind.”
As important as agility is to successful risk management, it is not an attribute possessed by many organizations—especially those that are large and complex. So any organization that achieves agility will have a powerful competitive advantage.
Tagged under Feature, Management, Risk Management, Blogs, CSuite, Operational Risk,