Risk Management-People and Processes in a Volatile Environment

With all the macro factors going around us in the world, we are probably in one of the most volatile environment in a very long time. The importance of risk management and effective mitigation, therefore, is probably higher than ever before. While there are various aspects and strategies to risk mitigation depending on the risk and the industry, people and processes remain imperative and common across most risks we face.

Having the right people, who understand the nature and complexity of the underlying transaction and can anticipate effects, of different events which are interlinked, on the intended outcome is one of the differentiators companies strive for. The effectiveness of the mitigation or avoidance of the risk is highly dependent on the timing of how soon this impact is identified. It would be safe to say, that the ability of the people involved is highly correlated to how successfully the company can navigate through the particular risk(s). A very wise person once said to me, “If I had to choose, I’d prefer to have the right person over the right process any day”. This is very true, the right person would have the insight, flexibility, and probably the ingenuity to identify and solve a problem regardless of process in place.

Processes on the other hand, provide the structure to have the right checks and balances in place in order to ensure different aspects across various dimensions of risk are considered for the underlying transaction. A strong process would enable early identification of a risk thereby allowing better mitigation. They also provide an assurance of sorts, that decisions go through a similar process to ensure consistency and coherence to the overall objectives that a company operates toward.

The above, most people would agree, is pretty obvious! The trick or the challenge, especially now is in managing a good balance between the processes that are laid out and relying on the people to achieve the right outcome. To elaborate on this, not every problem can be solved by putting a process in place, and not every risk can be mitigated by having ‘enough’ good people in place—not for most companies at least. In times like now when we are grappling with challenges like ‘the great resignation’ (myth or not), volatility and fluctuations that have not been seen before, new young entrants to the workforce who form a larger part of teams than ever before—the balance becomes even more delicate. Right retention tools and practices are key to avoid losing talent. Wellbeing and mental health are becoming a priority for more and more people—more and more processes often have a tendency of working against this. There is no perfect solution that would fit all. However, from the viewpoint of some over-arching principles and not introducing another formula – a few things we could possibly look at are;

1. Empowerment along with accountability

2. Trust among people, allowing for manageable failures (drive innovation and provide flexibility)

3. Young talent from the new generation entering the workforce – paired with experienced people in the organization to successfully blend both perspectives and advantages each bring

4. Dynamic processes allowing flexibility to adapt to unique situations

A good mix of the above should lead to provide a respectful, inclusive workplace which invites fresh perspectives and talents while leveraging on the expertise and existing industry knowledge, allowing people to take decisions to safeguard company interests within some boundaries. I would love to hear your perspectives on what has worked / not worked, and good practices that are being used.