360 — Degree Risk Assessment — in conversation with Lloyd Emerson Johnson
Risk mitigation is one of the key factors in creating a successful business. Today we are in conversation with risk management expert Lloyd Johnson, independent board member, and consultant. Lloyd’s judicious approach in identifying opportunities, mitigate risk, and leverage technology to drive organic and inorganic growth has made him the sought-after leader he is today.
This is part 4 of the conversation we had with Lloyd.
Risk management is one of your key competencies. You have been working in areas such as health, reputation, economic and civil unrest. In today’s and even more so, tomorrow’s world, understanding risk, knowing how to manage it, and confronting it head-on, is an asset that is essential on any board. How do you assess risk and what is your approach to managing risk on a high level?
“Let’s begin with the premise that the biggest threat to any strategy is risk and particularly downside risk! Today’s boards know that all strategies, however perfect, have inherent risks and these risks are as important to understand and manage as the strategy itself. Unaddressed risks are always the cause of failed strategies — 100% of the time.
“Still today, business literature is filled with post-mortems which show that some leaders continue to address risks based on intuition or gut feel. They instinctively manage initiatives by avoiding or managing around known risks. In these instances, they may achieve good results but sub-optimal outcomes. The best and most consistent outcomes are achieved when risks are faced head-on with identification, quantification and well-defined risk mitigation plans and actions are implemented.
“Alternatively, leading CEOs turn to trusted advisors, third-party consultants, and select board experts with relevant experience to risk-test their proposed actions in advance of implementation. They intuitively know that risks, well managed, can improve the effectiveness of a given strategy, reduce the need for crisis management, and exponentially increase the probability of a highly successful outcome.
“I have always favored a full 360-degree risk assessment approach. It’s a different methodology than many traditional approaches but it ensures the capture, assessment, and quantification of all material risks and it is extremely effective. We know that all risks have the potential to affect reputation/brand which most leaders will readily identify as the firm’s most valuable asset. This reason alone makes it a strategic imperative for boards and CEOs to balance major strategies with the proper level of risk identification and risk management.
“When discussing major business initiatives, it is important for boards to spend an appropriate amount of time discussing key risks and risk oversight strategy. In fact, it should be a normalized practice to include risk management as part of any significant board-approved action. Don’t overlook the high-impact, low-probability of occurrence risks. Ask “what would we do if it does happen” and, at a minimum, scenario planning should be considered for these risks.”
It’s been valuable to learn about your 360-degree risk assessment approach. Thanks, Lloyd.
You can read part 1 of the conversation with Lloyd here.
You can read part 2 of the conversation with Lloyd here.
You can read part 3 of the conversation with Lloyd here.