Creating to A Culture That Enables Active Risk Management


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In my last post, I discussed the importance of employing Active Risk Management (ARM) in today’s business and economic environment. Before organizations can systematically implement ARM, they need to commit to making a cultural change that encourages a free and open focus on discussing and escalating risks and the actions need to manage them.

The First Step Is a Change in Culture

The very first step down the path becoming an organization that used risk-based approaches to program and initiative execution is purely a change management one:

Your entire chain of command—from executive to line staff members—needs to embrace the concept of freely discussing risk on a daily basis

This may seem like a very obvious and simple change. It is not. This is fundamental change in how most organizations operate.

You Need to Encourage Free and Open Discussion of Risks and Concerns

How many Status Review meetings have we sat through in which nearly everything has a “Green” status? (Even though “everyone” in the room knows which initiatives are having problems—and often what those “unspoken” problems are.) Too many.

At best this is a waste of meeting time. At worst, it lets risks fester and develop into large-scale problems. This happens because—in most enterprises—too many people are afraid to point out risks, concerns and problems (specifically to the very people who are empowered to help resolve them quickly). As long as this cultural phenomenon is in place, it will be impossible to actively manage risk.

To resolve this you need a new paradigm. I recommend employing both the “carrot and stick” (or what Change Management guru, Kurt Lewin, called “Force Field Analysis”). I use three steps to do this:

  1. Hold regular portfolio reviews in which you review the risks and issues of each initiative
  2. Reward those who raise risks (along with actionable recommendations to address them) with by combining of praise with direct support that helps them resolve their risks
  3. Mark the initiatives of those who do not do this as “Red” and require them to review their projects with you in detail (so you can help them see the risks they are missing).

I apply this at all levels: executive through line staff. It is a constructive approach that uses mentoring and support to drive change. Over time (the time will vary based on the speed of your initiatives), it will create the culture you need to actively manage risk.

You Need to Be Comfortable with What This Will Expose

Making these changes will fundamentally alter how your organization discusses initiatives and their status. You will initially see almost all of your “All-Green” reports turn “Red.” From the outside, things may look worse in comparison to other organizations. You may even get less-than-desired attention because of this appearance.

This Discomfort Will Be Rewarded

Even though things may look worse, the opposite will be true. Your entire organization will be concentrating on preventing problems that could stand in the way of success before they will occur. You will create a much more trusting and open environment.

As a result, you will become more efficient, effective and creative at managing risk. The result of this will be increased level of success in your initiatives and far fewer cost and schedule overruns.

These rewards will become visible externally as well. I have implemented this approach many times, across several industries. Every time it resulted in greater trust and respect for the organization that employed it.

Currently, Mr. Roger Baker (CIO for the US Department of Veterans Affairs) is doing something very similar. It is not an easy process. However, it is earning the department a lot of respect for openness and transparency – and enabling them to focus on providing more effective services for their staff and veteran stakeholders.

Republished with author's permission from original post.

Jim Haughwout
Jim Haughwout (pronounced "how-it") is passionate about creating technology that improves how people live and work. He is the Chief Technology Architect at Savi Technology and a General Partner at Oulixeus Consulting. His work has been featured by Network World, ZDNet, Social Media Today, the IBM Press, CIO Magazine, Fast Company, GigaOm and more.


  1. Jim: thanks for providing this thought-provoking post.

    We’d probably drop our drinks if we heard the comment “Hey–can I tell you about MY latest failed campaign?” at our company’s annual sales and marketing kickoff event. Marketers and salespeople love successes, and love to hear about them. Failures and shortfalls are shunted to dark corners. If they’re discussed at all, the conversations are in hushed tones. (“I heard that Jennifer’s not making her number in the West.”)

    It’s a shame, because so much knowledge is lost. And it’s not that companies that enjoy a “25% close ratio” don’t have something to talk about when it comes to failure. It’s just that no one wants to think about the 75% of opportunities that fell out of the funnel. “Time to move on! I want to know about what you WILL close!”

    As you point out, companies cannot manage risks without candid and open dialog, and that requires a culture of embracing learning. The problem is, there’s so much ego in sales and marketing hierarchies that any hope for open discourse is squelched. It’s far easier to beat the stuffing out of the sales force for more revenue than it is to implicate the executive team that had a faulty strategy in the first place.

    This issue has not been overlooked in the military, where After Action Reviews are held and every participant in an event is free to identify breakdowns–even if it involves a senior officer. The outcome of lost knowledge is simply too catastrophic to make any artifact too sacrosanct to be shared.

    The practice is important for marketing and sales organizations as well.


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