Management Consulting for Nonprofits and Social Enterprises

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Risk identification is one of the first steps in risk management. The easiest risk to miss in a risk identification exercise is the obvious risk. (The second easiest risk to overlook is the one based on faulty assumptions – the subject of a future blog.)

Seeing the obvious is not always that easy to do, nor is it always “obvious”. I think that we have all had that “slap your head ‘I could have had a V8” moment when it comes to missed opportunities or simple and preventable errors were made.

As an example, I was involved in an event in which no one checked to ensure that the main participants would be available on the dates which had been locked in. Obvious, but easily overlooked when something is planned far in advance and the participants (in this case university students) generally have a great deal of freedom and flexibility in their schedules.

There are no magic bullets for uncovering the obvious, although there are some tactics or techniques that will help.

The first risk identification strategy is to make sure that you have cognitive diversity among the participants in your risk identification team. While we are all aware of the importance of identity diversity, cognitive diversity is also necessary for effective organizational performance. Cognitive diversity helps to prevent the dreaded groupthink but also helps to ensure that the obvious is not overlooked.

The second risk identification strategy is to have a dedicated devil’s advocate team to push, question, and essentially antagonize (albeit in a nice way) the risk identification team so that as many rocks are overturned and as many angles as possible are examined. Having a Devil’s Advocate pointing out flaws, inconsistencies, and inefficiencies, and essentially testing the risk management process is generally a worthwhile tactic to use.

The third risk identification strategy is what Warren Buffett’s partner Charlie Munger calls “invert”. The invert strategy involves considering how you would accomplish the exact opposite of what you are trying to do. It is another method that forces you to examine a situation from a different point of view which always helps to spot weaknesses and the obvious that may have been missed otherwise. (Fans of Seinfeld may realize that the inverted method is related to a strategy that George Constanza successfully employed in one episode when he realized that every decision he ever made was wrong, and thus he should just do the opposite of what he thought he should do.)

Missing the obvious in a risk identification is not only maddening, but it is also embarrassing. In terms of increasing risk management performance, minimizing the number of missed “obvious” risks is one of the easiest, yet most effective things to incorporate in your risk identification process.

Authors: Rick Nason and Omer Livvarcin

Omer and Rick are authors of the book Risk Management for Non-Profit Organizations, published by Business Expert Press

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