Creating Tomorrow
Newsletter August 2016
Our newsletter is one year old this month and we would like to thank all those readers who have given us feedback. In this edition we look at risk. Risk avoidance is about not doing things which could result in a negative outcome whilst risk reduction is about mitigating potential damage. We look at the psychology of this and some practical steps you can take to manage risk; the leader who always tries to avoid risk will often miss out on significant gains.
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Pat Collarbone
How to avoid confirmatory bias
How can a leader avoid falling into this trap? I believe one way is to through engaging others in a process based on asking and answering questions in order to stimulate critical thinking and draw out ideas and underlying assumptions.
The goal of the change process is to have a change team work together to construct meaning and arrive at an answer, not for an individual or group to win the argument.
In the words of Warren Buffett: "What the human being is best at doing is interpreting all new information so that their prior conclusions remain intact." By using a robust process one can mitigate this tendency.
“A ship is always safe at the shore - but that is NOT what it is built for.” ― Albert Einstein
Mitigating risk - a simple tool
Purpose
This tool helps you to identify sources of risk to the successful implementation of your change project and put in place appropriate actions that will reduce, if not eliminate, the risks so that success is more assured.
Process
Review your plans and question each step in order to highlight where you are making critical assumptions – for example, where you are dependent on something that is not entirely within your control.
- Log each assumption on the tool. Typically an assumption describes the outcomes that you hope - but you cannot be fully confident - will turn out the way you intend.
- Rate the level of confidence you have that things will turn out the way you assume – High, Medium or Low.
- Identify the risks associated with the assumption. Risks are the undesirable outcomes if the assumption does not hold true – i.e. things don’t work out the way you plan. Risks have two elements: (i) the immediate indicators that things are not working out as intended, and (ii) the impact on your project.
- For each risk, rate the criticality to the outcome of the project - High, Medium or Low. For example, ‘high’ criticality is something that threatens to stop your project going any further.
- Now identify what actions you can take to raise your confidence e.g. from ‘low’ to ‘high’ by reducing the uncertainties and thereby strengthening your assumption. You can also take actions that might reduce the critical impact of the risks – i.e. that it won’t be quite so bad if things don’t turn out the way you planned. The key objective should always be to increase the likelihood that it will.
- Assign each action to the person or people best able to execute them and monitor the results. The objective should be to increase your confidence in the assumption to ‘high’ or, even better, eliminate the uncertainties in your plan altogether.