Rebooting risk management

BLANKET statements about the impact of the coronavirus pandemic and its economic fallout may be viewed skeptically. But this much we can say: Risk management failures abounded. Indeed, regardless of how your organization has been affected, there is much to be learned about risk management from this still-unfolding crisis.

Even after the past 20 years of continual disruption, risk management is too often either misunderstood or mistakenly thought of as a compliance function. But while compliance regimes may work well for known risks with clear implications and proven mitigations in a fairly static environment, COVID-19 has demonstrated that the environment is anything but static. Risk is not a well-behaved house guest, and the impact of COVID-19 was impossible to predict. And every senior executive, board member, or risk leader whose organization has prospered in spite of, or even because of, the COVID-19 crisis should clearly understand: Next time will be different. The volatile, uncertain, complex, and ambiguous (VUCA)1 environment virtually guarantees that the next crisis will not be any more predictable than any others have been during the past 20 years.

The chance to upgrade and reposition risk management—to perform a risk reboot—is one of the true opportunities this crisis presents to risk leaders, executive teams, and organizations. Not a reboot in the reset-your-device or restart-the-system sense from the tech world, but in the reboot-the-franchise sense from the moviemaking world. We mean reimagining, refreshing, and re-energizing risk management and all of its elements to help address a highly uncertain future. The concrete outcome of this reboot is a risk leader’s agenda and mandate—and a risk management function—geared to the critical risks the organization faces as it pursues its purpose, mission, strategy, and goals.

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