Let’s talk risk

This year marked the tenth anniversary of the Fukushima nuclear accident and the eleventh anniversary of the BP Deepwater Horizon disaster— vivid reminders of the complexity of managing corporate risks, responsibility, and values. Both companies had an official ‘Safety First’ principle, as have many other companies that nevertheless found themselves harming the environment, their communities, or their own clients, and paying a hefty price for it. Ultimately hurting their own shareholders, too. 

What we find in common is not simply hypocrisy, but rather (1) an extended period of ‘risk incubation’, during which risks—often manifest in anomalies and near-misses—are tolerated and even “normalised,” and (2) a phenomenon called ‘value drift’: a gradual abandonment of the organisation’s value system.

This dangerous double helix is more common than one thinks; the headline-making disasters are just the tip of the iceberg. Since the 1970s, the frequency of manmade disasters has been rising exponentially in OECD countries, and regulation and corporate governance have been inadequate to manage modern industrial risk (Coleman, 2006[1]).

How can risk incubation be stopped? In the 1990s, MIT professor Chris Argyris proposed that only genuine, blame-free, bottom-up communication - from staff on the ground to those in the top echelons - could surface incubating risks[2]. In the last two decades, many routine risk management processes - including risk-assessment workshops, traffic-light systems, and formal risk reporting - have been developed, yet few include that crucial bottom-up communication.

We contend that bottom-up risk communication not only complements top-down risk management, but also helps top management and boards understand how - if at all - their organisation’s core values are put into action on the ground, and how they can become compromised, enabling risk incubation.

Such ‘risk talk’ can be distinguished from routine risk communication as follows:

1. Maintaining a focus on risk management is costly and, like sunscreen, produces no palpable benefits other than ‘no unpleasant surprises’. In contrast, risk talk is relatively cheap. It is also voluntary: employees speak up or not based on how they have already seen top management react.

2. Formal risk communication is dictated by the needs set out in a firm’s risk management framework and policies. In contrast, risk talk takes place on employees’ terms: they report, in their own language, issues that threaten safety or the organisation’s values. Risk talk requires only one important design decision: a checklist of which values and priorities employees should protect.

Genuine bottom-up risk-communication, though cheap and low-threshold, is not easy however. This is where action-oriented digital issue-reporting tools can facilitate. Once reported, time-stamped, and geo-tagged, an issue is ready for discussion and processing. Importantly, such tools create their own audit trail: actions and communications can be reviewed and monitored and accountability can be assigned, making it virtually impossible for managers to ‘hear no evil, see no evil’.

But it requires a blame-free environment to be a true success. There is a danger risk talk can be seen as top management’s latest ruse to ‘catch out’ failing middle-managers. In an environment of psychological safety, risk talk can address not only risk incubation but also value drift by fostering its cure-value infusion.

With corporate hypocrisy increasingly seen as a strategic risk, risk professionals have to ask themselves: what values, other than financial, are at stake in company operations? Accordingly, risk managers themselves need ‘repurposing’.

Genuine, blame-free, bottom-up risk communications - risk talk - is one response to this opportunity. By attacking the twin problems of risk incubation and value drift, organisations can become more resilient, empowering all employees to live their organisation’s most important values.

Kurt Meyer is risk management advisor and coach, associate at ETH Zurich and chairmen of the ETH Risk Center Advisory Board; Anette Mikes is associate professor, Saïd Business School, Oxford University, and Jonathan Stebbings is leadership consultant & associate fellow at Saïd Business School, Oxford University. 

For more information, visit www.risktalk.ch

[1] Coleman, L., Frequency of Man-Made Disasters in the 20^th Century. Journal of Contingencies and Crisis Management. Vol. 14, No.1. March 2006.

[2] Argyris, C., Good Communication that Blocks Learning. Harvard Business Review. July-August 1994.