Risk Mitigation – “plan is to describe how this particular risk will be handled – what, when, by whom and how will it be done to avoid it or minimize consequences if it becomes a liability“
During the Great Depression nearly 5000 banks failed. To mitigate the risk of that catastrophe happening again, the Glass-Steagall Act was created in 1933 to stop commercial banks and investment businesses from engaging with each other. For example mortgage businesses were not allowed to invest with banks to offer low rate mortgages to people who ultimately could not afford the houses! For 50 some years the Glass-Steagall Act mitigated risk and protected the USA from another financial collapse and great depression.
The Glass-Steagall Act was repealed by congress in 1999 leading to the investment-bank culture of the modern day world. The Gramm-Leach-Bliley Act (also known as the Financial Services Modernization Act of 1999) and was signed by guess who? ….Bill Clinton into law. Therefore there was no more risk mitigation. This repeal was widely viewed as a prime cause of the financial crisis in 2008.
Follow me please. We have just a bit more to go.
In the late 2000 and early 2010s the Great Recession happened over 19 months and a whopping 1.9 trillion dollars was needed to bail out multiple institutions to stop the entire world economy from collapsing.
In 2010 President Obama signed into law the Dodd–Frank Wall Street Reform and Consumer Protection Act to once again mitigate the risk of another Great Recession. And now Trump will repeal this, and once again and we will have little to no risk mitigation between commercial banks and investment businesses.
So buckle up its going to be an extremely rough ride!
My point isn’t to chastise the USA for their investment-bank culture roller coaster ride, it’s about the extreme importance of Risk Mitigation or Risk Management.
Risk Management requires unwavering discipline. I’ve lived through and discussed a few project horror stories with clients where there was little to no risk management governance. Projects deadlines were missed or people failed to show up, due to lack of foresight, lack of collaboration or any type of Risk Identification work shop. It takes discipline, collaboration and executive support to reduce risk and its surprising how many smart people miss this.
Risk Management absolutely requires a workshop at the beginning of each project. I’ve heard the sighs emitting from people at the thought of a Risk Management workshop. Everyone thinks they are smart enough to regulate and govern themselves but you know what? They can’t. Having your members identify their top 3 risks in areas such as data, interfaces, finance or supply chain will probably save your project from serious or even irreversible harm.
Identify an owner of each risk and own it. Leaders are ultimately responsible for the success or failure of a project. In the book – Extreme Ownership: How U.S. Navy SEALs Lead and Win the authors talk about how they owned their risks in the frontlines in Iraq and also how their commanding officer chewed them out for not mitigating risks properly. The owner of each project risk is absolutely responsible and can’t pass on the blame. As the leader and owner…own it. Don’t play the blame game.
Diligently follow through on each Risk for the length of the project. Yes, during our last project we reviewed each on a weekly basis and the project team provided a status like clockwork. Were the third party vendors outside of the system ready to test and manually update master data? Would we have users from Finance to perform integration testing? These were the type of questions we asked ourselves each week for months. The Navy Seals they asked themselves if they had the proper cover from the team when pulling back from deep enemy territory. You know what? The first time they didn’t realize there was a second task unit to cover them. That risk was mitigated by making sure all task units were accounted for during the entire length of deployment. Follow through.
It only takes 15 to 30 minutes to review your risks. Meetings don’t have to be a long drawn out affair. Be open and honest with the team and ask for help if required.
Risk Management can and should be applied to all aspects of life. Whether you are creating a project plan, starting out on a new job, creating an S&OP plan, deployed as a Navy Seal, starting a business or becoming President elect, risk management is the dominant methodology to avoid future catastrophes.
Are you planning your Risk Management workshop yet?
Can we avoid another 1.9 trillion dollar bail out please?
Terry Vermeylen is hell bent on rapidly transforming your business into a World Class Operation by major transformation or by eliminating one bad habit at a time.
Terry Vermeylen brings 30+ years of experience in SAP and Supply Chain Process improvement. As an SAP professional and Supply Chain Architect he has worked and consulted for some of the world’s largest and most successful manufacturing companies focusing primarily on the Aerospace and Pharmaceutical industries as well as the US Military.
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