Risks are everywhere: How will you capitalize on them?

BY GAIL STEPHENS, CEO, BC PENSION CORPORATION

All of us, whatever business we’re in, want our organizations to succeed, but the truth is we will land somewhere on a continuum between success and failure. It’s just a question of degree, and often it is risk management that makes the difference.

Risk management is about looking at future situations and deciding in advance how we’ll handle them. It’s not a concept just for major organizations, either. Whether it’s the BC Pension Corporation, a school district or your association of school plant officials, every organization faces risks. Challenges with financial resources, access to critical staff and talented leadership, changes in legislation and other factors all pose risks to our operations.

Unfortunately, very few organizations – perhaps only 16 to 20 per cent – have risk management processes integrated into the way they do business. Most see integrated risk manage-

Gail Stephens

ment, or IRM, only as a way to manage negative scenarios, mitigate losses or avoid trouble. But such a perspective means these companies, associations and other organizations are missing out on a key concept in determining their own success.

Just as every action might have an equal and opposite reaction, the risks we face in our operations are balanced with opportunities. That’s such an important concept that it bears repeating: with risk comes opportunity.

The downside to traditional risk management is that organizations can develop a risk-averse culture. Successful managers and leaders know they have to find the potential that’s hidden in business risks so they can create strategic opportunities for the long term. That’s where integrated risk management comes in.

IRM looks broadly at all of the risks an organizations faces, categorizes them and sets a course for action. It’s about managing the negatives and making the most out of the opportunities that are in front of us. Let me touch briefly on these concepts:

Assessing the risks

There are lots of risks facing any organization, and it’s not practical to identify and assess every one. Focus on the most important risks, grouping related ones into categories. The goal here is to rank the risks by priority and identify the opportunities that lie within them so you can better target your actions in response.

Managing the negatives (the risks or threats)

There are four ways to manage a risk: • Accept the risk and move on (if the expected benefits are greater than the downsides); • Avoid it by discontinuing an activity or not proceeding with a plan; • Transfer the risk to another entity; or • Mitigate it with strategies to reduce the likelihood or consequences of the risk.

Seizing opportunities

Similarly, there are four ways you can manage opportunity or make the most of a risk situation: • Take action to capitalize on the opportunity yourself; • Share the opportunity with another party who can do more with it to benefit your project or organization; • Take steps to enhance the positive impact of an anticipated event; or • Accept the risk and whatever opportunities flow from it.

An important part of any integrated risk management process is ensuring it creates accountability in an organization. Risks need to be monitored and reported on appropriately to executives, managers, staff and stakeholders. And the processes used to manage risks need to be updated over time so that conditions for success can be maintained.

Integrated risk management is not about one-off processes or exercises. It’s about a philosophical approach, backed by established tools, that people at every level in an organization can use to increase their chances for success. Those who do it well can realize tremendous benefits for their organizations (and themselves), including: • Better-informed decisions • Greater management consensus • Increased management accountability • Smoother governance practices • Ability to meet strategic goals • Better communications internally and externally • Reduced volatility in costs • Increased work-unit profitability

My bottom line is this: risk is a normal part of any operation, and dealing with it effectively is one of the most important tasks we face today. Take pride in what you do. Make a difference. Success will follow from that vision.

At the end of April, Gail Stephens left the Pension Corporation and headed to the University of Calgary to take on the role of Vice President, Finance and Services. Gail was the CEO of the Pension Corporation since May 2003, and has been a wonderful leader. Her staff was sad to see her go. ❏