The first time I had a glance to the total concept of Risk Management was when I was studying to get my Supply Chain Management certification (APCS’ CSCP)

As part of the best practices chapter I learned about the idea of identifying risks on multiple points of the Supply Chain and how to differentiate between Risks and make priorities.

I learned how to create a matrix that relates the probability of an event happening and the financial impact of the event to create priorities.

The certification materials describe how to create contingency plans, assigning a responsible to each action and keeping it up to date.

As part of the CPIM education I learned there are ISO certifications to guide the inclusion of best practices when a Risk Management plan is introduced in a company.

I also learned about the relationship of cost to prevent vs. cost of fix.

Some stories relevant the last concept helped to provide context. Like the legal problems Ford Motor Co. faced when they knew about the problem with the Ford Pinto and its propensity to burst in flames potentially killing its occupants and how Ford Motor Co. at the time decided that it would be cheaper paying compensations to the families than fixing the problem. When this decision was made public, it affected greatly the reputation of the company at the time and rightfully so.

But the most important concept I learned about Risk Management was VUCA. Navigating an environment where Volatility, Uncertainty, Complexity and Ambiguity are present all at the same time.

Later I learned about the methodology from the CERM Academy many additional concepts like Risk Based Decision Making and Risk Based Problem Solving.

Also, this methodology makes clear the impact of Risk at different levels of the Management process.

Probably the major difference I found between their methodology and everything I’ve read before was the concept of upside risk and downside risk. Not just planning for potential disasters, but also for potential opportunities as deviations to the plan.

In my professional experience I had dealt with many aspects of Risk Management, but formal education made all these aspects come into focus as part of an integrated process. It was like a light being turned on, in a room where I knew several of the objects inside, but now I could see them with color and their relationship of one with the other.

Studying a structured approach to Risk Management gave me a process that can be learned, repeated and improved. Lessons that can make me a better instructor, consultant and better rounded professional.

Lessons Learned

Having formal education in Risk Management provided an extensive list of lessons, too long for a short article but I will list those that at this point consider the most relevant:

1. VUCA is not an eventuality. It is the new norm.
2. Risk management education is not superfluous, but necessary to every decision maker.
3. Lives and health take priority over cost when deciding the importance of an action.
4. Risk planning as a Plan-B stored in a drawer waiting for a contingency to happen is better than nothing, but a much better approach is using the optics of Risk as a look-ahead method to navigate the ever present VUCA environment.
5. From the very starting point of Strategic Planning to the other end of the day-to-day Execution, education in Risk Management has something to offer in improving the response to events in this new norm.
6. Companies that see only the downside part of Risk are missing half of the picture

I want to finish the last of these four brief articles with an invitation to all decision makers to get informed, to educate yourselves and to find out how Risk Based Thinking can make you much more valuable professionals, and invite all companies to invest in education, deployment and improvement of Risk Management methodologies. Sure payback at the end of the process.

BIO:

Victor Granados, CC, CPIM, CSCP
President of the Ventura County Chapter of APICS.  APICS IDP Master instructor for Operations Management (CPIM) and Associate Instructor for Supply Chain Management (CSCP) certifications

Sole Proprietor of Granados Systems & Processes Consulting
Victor Granados, CC, CPIM, CSCP
(424) 644-9671