Friday, October 9, 2020

Uncover Hidden Risks to Improve Change and Strategy Management Success Rate

Looking deeply into the future and uncovering hidden risks have a profound effect on where you go, and how you get there cautiously in an intelligent manner.

The digital era is volatile, complex, uncertain, ambiguous, and information abundant. There are unknown interactions and very high inner dynamics so there is always something that will go wrong sooner or later. 

The point is how digital leaders are able to leverage analytics and "gut feeling" to uncover potential business risks, bridge multitude of insight gaps to improve change and strategy management success rate.

Estimating the likelihood of downside business events occurring: Uncertainty and risk are inherent in every venture. Business leaders today need to see further than what all others see; understand issues from new angles, broader perspectives, or deep perception; predict what will happen and take steps further - what they should do upon it. Sometimes they need to be able to look for something “hidden,” in order to make better assumptions or improve forecast precision. Know your information, then see what it predicts. It’s all in what you do with the information that ultimately matters.

Besides information precision, the highest level of future sensitivity comes from appreciation of the whole situation which relies heavily on intuition and sense as well. Business leaders have to observe deep, ask logical questions, forecast upcoming change with a certain degree of precision. For example, in consumer-centric organizations: What's going on in the market? Will you experience shrunk transactional volumes? Will you lose some marketing territories? Where are the suppliers headed? Where are the competitors headed? Does the business make decisions too slow? The wrong end can lead to catastrophic business setback or stagnation. That’s why it is more important to estimate the likelihood of downside business events occurring, and drive business change smoothly.

Estimating the magnitude of the impact of the event which may occur in strategic/operational plans: With unprecedented uncertainty and high velocity of the business, there is no amount of quantitative analysis that can accurately predict what harm or which opportunity lies ahead. But assuming the risk is highly likely to occur, corporate management needs to imagine with many experiences involved in current or in the past, estimate the impact of upcoming events that may happen in strategy/operation plans, and the consequences.

Generally, there are two types of risks: downward risks (loss of value, money, and business) or upward risks (opportunity to make money, expand the business, and create value). Some risks can be quantifiable; some can only be approximated. To set the priority right, which degree of consequence from a single event is the threshold that requires the management to divert some of their time from other business activities. One thing they better have is data backing up their decisions. You have to be honest about it and should have the measures laid out beforehand to “post forecast” the change impact.

Knowing the business tolerance of their enterprise for the resulting downside risks: Either preventing or mitigating risks, it requires business insight to predict the upcoming risks and help the business prevent potential problems. Business management needs to define organizational risk appetite and risk attitude so they know the business tolerance of their enterprise for the resulting downsides risks. Risk appetite implies some abilities to actually measure risk level, risk attitude is to determine the company’s attitude and strength to deal with risks.

It’s important to develop business capabilities to tolerate ambiguity and proactively manage risks. Organizations need to have the right dose of risk appetite and high risk intelligence. Stakeholders ranging from investors to customers, to ordinary citizens, to peer companies might all benefit or suffer from the risk intelligence of a company. Preventing problems, managing risks and enabling continuous improvement require the power of information, leadership support, and integrated data-based insight. 

The digital transformation is now spreading rapidly to enable organizations of all shapes and sizes to reinvent themselves. The digital business ecosystem is complex and hyper-connected, looking deeply into the future and uncovering hidden risks have a profound effect on where you go, and how you get there cautiously in an intelligent manner to build business competency and improve change and strategy management success rate.


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