Michael D. Moberly May 18, 2010
This post describes strategies for making presentations to management teams and boards about mitigating business risks. An important underlier to this discussion however, is to recognize that 65+% of most company’s value, sources of revenue, and ‘building blocks’ for future wealth creation and sustainability today lie in intangible, not tangible assets. Accordingly, in my view, business risk management today should be largely focused on intangible assets.
Unfortunately, as many risk management specialists know all too well, a disconserting, and often costly prelude to executing an enterprise wide (business) risk management/mitigation program, is for a risk to materialize in a company (or, a close competitor) that produces:
1. Significant and sudden hemorrhaging of value, revenue, brand, reputation, image, goodwill, competitive advantages, etc.
2. Adverse public, political, and/or regulatory spillovers that lead to even further and more long term hemorrhaging of market share and value.
When business risks do materialize, its common for previous expressions of disinterest to give way to setting a more receptive stage for a substantive committment to business risk management planninng thats particularly directed to sustaining control, use, ownership, and value of intangible assets.
I have found there are (generally) two factors that influence how business risks will be received (interpreted, assessed) by management teams and boards and ultimately influence their propensity for action, i.e., if the business risk is…
1. Presented in subjective vs. objective contexts. Any tendency for risk advocates to over-dramatize a company’s vulnerability and probability, to the exclusion or minimalization of criticality, i.e., near-long term business impacts, will inevitably allow the decision to boil down to competing interpretations and assessments (vs. consenus) of the risk relative to the company’s vulnerability, probability, and criticality. Therefore, an essential requisite to making a business risk presentation is to recognize that while management team and board may not be familiar with the intricies of current business risks/threats, they typically grasp the ‘big picture’ and have already framed certain perspectives, albeit from their managerial – fiscal position.
2. Portrayed as a single occurring event rather than conveying the potential for multiple risks materializing simultaneously that produce enterprise-wide cascading affects that significantly elevate both the cost and challenge to stop the value, revenue, and competitive advantage hemorrahging that’s occuring.
I welcome – look forward to learning your perspectives.