Are You Also Identifying Emerging Risks?
You have been thinking about this presentation for days, if not weeks, and you know what format you will use to give an overview of the most important risks. You will do exactly what you did at the last presentation months ago. At that presentation, you had applied the lessons that skilled presenters have taught you over the years: “Avoid boring slides with too much text”, “Use appealing graphics or visuals”, “Use ‘warm’ colors”, “Don’t just read what’s on the slides”. For this presentation, just like the previous one, you will use a risk heat map.
As a risk professional, you believe that you can’t go wrong with a risk heat map. It’s easy to understand, not too wordy, and includes bright colors (yellow, orange and red). All of this offers a sharp contrast to boring slides that the executives have seen at some conferences or meetings, those with too much text where the presenter is simply repeating what’s on the slides, as if he’s teaching the audience how to read.
At the end of your presentation, the executives thank you and congratulate you on a job well done. You leave the conference room with the satisfaction that you were successful. As a presentation, it probably was a success. But from a risk management perspective, your presentation was a failure.
By now you’re wondering what’s the purpose of this story. The answer is in an article that includes an important lesson that I want to share. The article, “How ERM Can Support Strategy and Performance”, is from Deloitte and includes the following key passage:
“One of the top challenges I see is the difficulty to identify emerging risks to strategy. There could be an ERM program in place, but it may be only identifying current known risks rather than also helping executives anticipate unknown risks that may be emerging. One sign an ERM program is not effective is when executives see the same risk heat map year after year, which does not help them make better decisions.”
The important lesson is that emerging risks, those that are not yet affecting your enterprise, must receive as much attention and focus as currently known risks. Many organizations rely on a risk register from which they create a risk heat map to visually show top risks. But a risk register is too often treated like a “laundry list” of the most immediate, visible, and pressing risks. It does not provide the foresight required to anticipate future risks that are emerging.
Next time you give a presentation to executives about top risks, continue to show a risk heat map. After all, a visual representation of risks is always better than a slide filled with too much text. But remember also to create an awareness of emerging risks to help your organization achieve its business, strategic and operational objectives today and tomorrow.