Fear, trust and risk tolerance

I’ve been called to facilitate risk assessments for organizations varying from project teams to corporate boards of directors. Surprisingly, I still occasionally find the risk assessment to be the first time the key stakeholders have come together to discuss their goals and objectives in a critical way and to form a common understanding for how comfortable they are with uncertainty; what is their risk tolerance?

Take, for example, the case of a government department responsible for making statutory decisions on applications for commercial use of government land, such as grazing livestock, accessing groundwater, or establishing a wilderness adventure guiding business. A regional office was experiencing long delays processing applications, and the backlog had become a major concern for management. I was asked to conduct a risk assessment workshop and develop a risk-based decision-making tool to improve the process and help clear the backlog.
The risk assessment revealed something interesting: the staff responsible for reviewing and approving the applications seemed to have all the tools they needed. They were well trained, knowledgeable, motivated and capable. So what was the problem? The major risk identified by the staff was that their decision to approve or deny the land-use application might give rise to the applicant being unhappy and lodging a complaint; the staff felt they needed an iron-clad case, and would often request additional information to cover any possible contingency. Rather than making a good, timely decision based on the information available, they felt the need to hold out for a perfect one. They were uncomfortable accepting any uncertainty in the process; in other words, they were risk averse, and the result was indecision and ‘analysis paralysis’.
The solution in this case was not a new risk-based decision model. The solution came in the form of a question: “What’s the worst that could happen?” The answer was “The applicant could write a letter of complaint to the Minister”. What happened next was particularly interesting. The Director simply said, “So what? We’ll just send the Minister a note explaining why you made the decision you did. I trust you, and even if you make an honest mistake, or a decision is overturned for political reasons, I’ve got your back.”
The effect was tangible and immediate. The staff was given permission to accept that their decisions might be unpopular, even occasionally wrong, but so long as they were reasonable, they would be supported by executive. They didn’t need a new decision-making process. All they needed was some clear communication about expectations. Application processing sped up, wait times decreased, and overall applicant satisfaction increased. Staff were empowered, workplace stress decreased, and within three months the backlog was eliminated.
The lesson here is that sometimes, a new risk-based process isn’t required. Instead, clear articulation of goals, objectives and the executive’s expectations vis-à-vis risk tolerance is all that’s required.
Risk tolerance changes depending on the organization. In a hospital, for example, where the answer to the question “What’s the worst that can happen?” is “People could die”, the tolerance of risk is much lower, and accordingly, risk controls like infection control and detailed charting are much more robust. The key to effective risk management is to balance risk with appropriate controls, and an essential component of that is to ensure your staff knows which risks are acceptable, and which are not.
I can help your organization define its risk tolerance, so you can better define your goals and objectives, empower your employees, and set clear performance expectations for your teams. Want to know more? I’d love to hear from you. If you have questions, comments or want to geek out about risk management, contact me:
[email protected]

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