Ricardo Wilson-Grau
______________________________________________
Today’s rapid
changes within and outside Northern and Southern NGOs heighten uncertainty
about how to meet new challenges and achieve results. In this volatile
environment, risk management is a tool for maximising an NGO’s opportunties and
minimising the dangers to success. It enables NGO decision-makers to think
strategically all the time.
Hoy día, los cambios veloces dentro y fuera de
ONGs en el Norte y el Sur agudiza la incertidumbre sobre como enfrentar los
nuevos retos y lograr resultados. En este entorno volátil, la gestión de riesgo
es una herramienta para maximizar las oportunidades para una ONG y minimizar
los peligros para el éxito. Les ayuda a quienes toman decisiones a pensar
estratégicamente todo el tiempo.
Strategic thinking through risk management
In recent years, non-governmental organisations committed
to social change have invested heavily in improving their professional
competence. One innovation has been the use of strategic planning. Typically,
once every three or five years, NGOs agree and implement a multi-annual process
sharply focused on positioning the organisation to achieve their mission and
long-term goals. Increasingly, however, development NGOs experience rapid,
accelerating change. Not only do strategic decisions have to be made outside of
a multi-year cycle, but by the time managers know if a decision has been
implemented or not, they have taken new decisions. Thus, staff
"ownership" or "empowerment" is vital; delegation of
responsibility and authority for achieving an organisation's fundamental goals
has never been more important.
Therefore, today and especially tomorrow, to be effective
an NGO's strategic planning must be accompanied by on-going strategic thinking,
at all organisational levels. An NGO must constantly generate new strategies to
achieve results in line with its fundamental purpose. Success will depend on
strategic management: continuously integrating strategic thinking and planning.
Strategic risk management is a new approach of special value to NGOs whose
mission is social change.
Risk is inherent to life. The future is always uncertain
and the outcomes of events unpredictable. Furthermore, for development NGOs,
risks cannot be avoided and indeed must be embraced. Innovation for human
development requires risk-taking. Commonly, risk is thought of as something
negative, as the danger of something undesirable occurring. That is too
limited. Risk is also positive; there is an upside and a downside. A
development organisation must dare to succeed and dare to fail.
NGO decision-makers take most daily risks in stride
because they can reduce the probability of negative outcomes and increase the
chances of positive outcomes for most events that only one hundred years ago
were terrifying. Said another way, today the uncertainty that matters most is
strategic--we must focus on the change that affects the fundamentals of
organisational success or failure. Strategic risk management enables NGOs to
maximise the potential for success and minimise the danger of failure.
The principles and advantages of strategic risk management
One of the beauties of the risk concept is its
simplicity. There are four essential
questions:
1. What
do I, or we, want to achieve in order to fulfil our mission?
2. For
each goal, what is the likelihood of success and of failure?
3. What
are the positive and negative consequences if I (we) succeed or fail?
4. What
will be the cost to enhance the probability and consequences of success and
reduce the chances of failure?
Thus, strategic risk-taking permits an organisation to
focus continually on the most important positive and negative challenges and be
as rationale as possible in making decisions on how to meet them.
Of course, life cannot be so simple. There is an equally
important and much more complex dimension to risk management. Individuals,
organisations and societies are all unique. Thus, risk is rooted in specific
historical contexts--from the political to the psychological, the economic to
the environmental--that shape people's responses and perceptions of the
probability and importance of an uncertain event. Strategic risk management can
enhance but never replace a development decision-maker's knowledge, field
experience, cross-cultural skills, and other personal abilities. Specifically,
it will enable NGO leaders to enhance their capacity in four areas.
Information. In
management, the information function is vital. In today's "knowledge
societies" decision-makers are flooded with facts and figures and ideas.
The technological possibilities are an incredible temptation to nurture a false
sense of security by attempting to process all available information. Of
course, managers must constantly observe, consult, read and listen to inform
themselves. Strategic risk management, however, offers NGO decision-makers a
methodology for rapidly sifting through and selecting the relevant information.
Action. Today,
NGO managers must combine hard, in-depth analysis with fast decisions. Risk
management enables a decision-maker to act even as she or he thinks. Past
successes and failures are analysed not to know what happened, or to explain
why things are as they are, but to take the best decision about new activities.
Risk principles enable a decision-maker to identify what to change and innovate
in order to maximise gains and minimise losses in the future. For strategic
decisions, certainly the search for truth must be rigorous. Risk management
incorporates the rational perspective of science but the purpose is to
understand in order to decide, to set objectives and make plans, but not at the
expense of acting on them.
Delegation.
Never before has the need for subsidiarity been greater for development NGOs.
Strategic risk management facilitates delegation because risk principles are
applicable at all organisational levels. Strategic risk management enables
decision-makers to assign authority and responsibility upwards, downwards and
across. Everyone can be engaged in taking risks responsibly to achieve their
work units' "missions" or long-term goals. Nonetheless, the
methodology requires trust between managers and staff and builds on individual
competence. Thus, for instance, in an organisation where everyone uses a risk
approach, senior programme managers with substantial field experience will be
able to delegate with greater confidence to junior staff. And, quick-learning,
self-critical programme staff will develop faster.
Judgement. At
the end of the day, solid risk-taking is based on sound judgement. Even in
situations where there is mathematical certainty about probabilities, people
act on their beliefs about the chances of good and bad outcomes. Similarly,
people take action based on their preferences for one outcome over another.
What strategic risk management contributes is integrating reasoning with
intuition, art with science. What will we do, and why? In cases where the
risk-taker must decide alone, her or his judgements will be based on logically
analysed, essential information and on personal but strongly reasoned beliefs
and preferences. When the decision-maker is two or more people, strategic risk
management strengthens, integrates, and fosters respect for divergent views
about the probability and the importance of potential--desirable and
undesirable--outcomes.
Initiating a strategic risk management process
As with most essential concepts, risk principles can best
be learned through practice. Thus the first step is for a decision-maker (board
chair, executive director, department head, team leader) or a group of people
with shared responsibility and authority (board of directors, management
committee, team members) to apply the principles. The application is in five steps
of reflection that feedback to each other.
1. Identify
the principal positive risks (or "opportunities") and the major
negative risks (or threats or dangers) to achieving the purpose of the
organisation or one of its work units.
2. Understand
the degree of probability for both positive and negative outcomes on the path
to achieving those institutional objectives.
3. Weigh
the potential results, both positive and negative, of success and failure.
4. Consider
the costs.
5. Take
action to enhance the possibility of success, control or mitigate the chance of
failure, and identify new opportunities and risks.
In preparation, the decision-maker(s) simply reviews all
the information she, he or they consider important:
·
What ideas do we have about what we should aim
to achieve, and why?
·
What are our internal strengths and weaknesses
to do what we do?
·
What threats and dangers do we face out in the
world?
·
If these negative risks materialise and become a
problem, what will we lose?
In each step of discussion, the individual(s) will decide
what is relevant and if any additional information is required. Remember, it is
all about judgement, which in turn is a matter of beliefs and preferences about
opportunities, their risks and thus about information as well.
In sum, as a risk-taking guru has said, "no risk is
the highest risk of all". At the end of the day, there is no way to take
the edge off the uncertainty of social change and NGO management. There is
much, however, that you can do to influence the probability of success and
failure, and their consequences, in each opportunity to achieve your mission.
Strategic risk management is a tool to help you succeed.
The author
Ricardo Wilson-Grau is a management consultant and since
1993 a senior advisor with Novib. Currently, he is responsible for introducing
a risk management approach to Novib’s grant-making. Nonetheless, the views in
this article are not necessarily those of Novib. Contact details:
Pallieterstraat 51, 1183 LB, Amstelveen, Netherlands. ricardo.wilson-grau@inter.nl.net.
For further information, see: www.ngoriskmanagement.org.
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