In recent blog I wrote that at People Based Solutions we believe that those individuals who lead the organisation must also manage it. I suggested Mangers ensure that while undertaking the highly volatile business of running the organisation, there is predictability and order.
I outlined the 6 key functions of the effective manager:
1.
They set SMART objectives
2.
They stay in control
3.
They understand and manage risk
4.
They operate a balanced scorecard
5.
They create a “golden thread”
6.
They plan for tomorrow.
In my last blog I wrote about how effective managers set SMART objectives and stay in control. In
this blog, I will deal with how effective Mangers understand and manage risk.
Understanding and Managing Risk
Effective managers realise that understanding and managing
risk is a key part of their role. They identify
the risks faced by their business, project or operation, and assess the likelihood
of that risk crystalising and the impact
on the organisation if that was to happen.
Having identified a risk, the effective manager will develop
a plan to deal with it proactively.
They develop risk management plans which utilise a range of approaches to
deal with risks once they have been identified:
·
They may choose to avoid the risk completely, for
example, not introducing a new process, such as a new stock-control software
package, or deciding against transferring a contract to another supplier. In situations where, for whatever reasons,
the risks of introducing changes are considered likely to outweigh any
benefits, the effective manager may choose to eliminate the factors that give
rise to the risk.
·
They may choose to take out an insurance policy
so if a risk does crystalise, they can claim on that policy to offset the risk; effectively transferring some of the risk to a 3rd party. For example, if a flood risk has been identified,
even if the likelihood is low, in the event of a flood operations could be
halted. This could trigger other unwanted consequences, such as a penalty clauses on key contracts. In such circumstances,
effective managers may decide to take
out special insurance, so the full financial impact would not be borne by the organisation.
· They may choose to reduce the likelihood of a
particular risk occurring. For example, the effective manager may identify that
they are overly reliant on one supplier. If that supplier, for whatever reason, was
unable to supply them, this may prevent them from serving their
customers. In such circumstances the
effective manager may choose to use more than one supplier, even if this proved
to be slightly more expensive. Thus reducing the risk of being
unable to meet their own customer demands as a result of events affecting that particular supplier.
·
The effective manager will have plans in place
to deal with risks when they do occur.
This may be something as simple as having a list of mobile phone numbers
if the phone system goes down or off-site back-ups of key IT systems and data,
through to fully documented and rehearsed business continuity plans.
Effective managers appreciate that to manage risks they need
to have identified their risks, and have strategies for dealing with those
risks.
Having identified the risk and chosen how they are best dealt
with, effective managers appreciate they must have plans in place to implement their
chosen approach from the outset.
When it comes to managing risk, there are certain behaviours
that effective managers avoid, they don’t:
·
Ignore risks, and pretend they don’t exist· Assume their boss, or someone else, is responsible for identifying or managing the risks in their department or section
· Assume that risks, even those with a low probability, will never crystalise.
Effective managers understand
that when it comes to managing risk, prevention is better than a cure , but
they also know that often risks can’t be totally
eliminated, and have to be carried . They appreciate that understanding the
organisation’s “risk profile” enables them to design safeguards to prevent risk,
or to develop plans to minimize the damage caused once a risk has crystalised. Effective managers understand that creating detailed
plans to proactively managing risk can pay dividends in the long term.
This article has been posted by Sean McCann, the
Managing Director of People Based Solutions an HR consultancy specialising in
Management Development. If you would like to know more about the Effective
Manager Programme, either public courses or in house for your organisation
contact us at:
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