A Year of Wrestling With Risk in a Disruptive World

2014 sparked an array of unprecedented, frightening and devastating events -- from the prolonged Ebola outbreak, the kidnappings of hundreds of Nigerian girls and the disappearance of two airlines in Asian seas to massive and destructive data breaches and the ISIS beheadings. Increasingly, our world appears to be more volatile and disruptive. But as chilling as are these events, our collective reaction presents even greater concern.

Despite our initial fixation on these events, our capacity for concern is limited often to the news cycle for each, at best. Whether it reflects a function of instinct or basic survival, we seem to neatly package and compartmentalize these crises and their meaning as "beyond our control or understanding." Or, worse, as simply irrelevant and, thus, "no further action required."

Generally, pure instinct defines the reaction of the uninitiated to crises of any scale. And with the spectrum of the catastrophes cited above, instinct and avoidance are natural responses to these highly unnatural event. But as the world grows more disruptive and unpredictable, seemingly by the day, the urgency of building risk resilience increases commensurately. In basic terms, this means organizational leaders from every precinct of endeavor -- government, business, nongovernmental organizations (NGOs) and communities -- need to create a natural capability to engage and manage unnatural events running the gamut from emergency response to compliance and operational risk.

The challenge is particularly acute in the corporate context in which the vast majority of crises do not involve massive loss of life and, most frequently, reflect the inability for companies and their leadership to confront risks when the threat level to the company and its stakeholders is low. If experience is an accurate guide, it is fear and instinct that is the primary obstacle to proactive crisis risk management as it nearly always involves short term pain for long term gain.

This past year, General Motors, Sony and the National Football League's decisional crises with player conduct off the field exemplify how reputational risk and crisis continues to expose major deficits in risk readiness. Leaders must find ways to transcend instinctual discomfort with fluid events, imperfect information and little control. These examples are particularly probative because most reputational crises emerge as a direct consequence of corporate commission or omission, rather than uncontrollable external events.

The courage and innovation required to break the "instinct" method already is underway. A corporate leader in global consumer goods as well as one of Europe's largest energy suppliers have borrowed from the total quality management (TQM) approach to production. Using quality assurance and continuous improvement disciplines including Six Sigma and Kaizen, these companies now boast proven metrics for reducing operational risk costs dramatically while improving productivity and profitability.

Much like the heuristics for building capacity in emergency response and catastrophe training, the TQM principles are basic:

• Plan (drive, direct)

• Do (deploy, support, participate)

• Check (review)

• Act (recognize, communicate, revise)

By embedding qualitative risk (reputation and crisis) into a total quality control approach, these companies and others are experiencing quantitative reductions in risk-associated costs. They also are seeing commercial improvements in supply-chain production processes, customer retention, sustainability, capital growth, cash reserves and employee morale. Approaching crisis risk as more of a probability than a possibility empowers leaders to be active stewards of reputational value.

Though it is fantasy to believe that our increasingly disruptive world will turn itself around in 2015, it is quite realistic that this coming year will deliver meaningful growth and resilience to those organizations with the resolve to confront the instinctual discomfort that profound but positive change requires.

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