Imagine you are at your company’s annual awards dinner. You are sat at the back of the hall, quietly sipping on your after-dinner coffee when, suddenly, you hear your name being announced. You’ve just won a hugely important award, such as ‘Best Slogan on a Coffee Mug’, or ‘Best Zoom Background’. All you have to do now is make it to the stage to collect your trophy.
Just as you are about to leap from your seat and go running forward to receive the adulation of your peers, you feel a hand press down on your shoulder. You look round to see Dave from the Risk team.
“You can’t just go running up to the stage,” says Dave, “it’s a minefield of risk out there. You need to properly assess the dangers.”
“Fine,” you say, slumping back into your seat, “what could go wrong?”
“Well,” says Dave, “a risk is an event that could happen that would impact the chances of you achieving your goal. For example, if your goal is to get to the stage and receive your award, a risk would be that you trip on a trailing cable, bang your head on an ice bucket and knock yourself out.”
“That’s ridiculous!” you say. “Surely that’s never going to happen?”
Dave smiles. “You make a good point. We need to know the likelihood of an event happening and what the impact would be if it did. Getting knocked out would have a pretty serious impact, and not just on your head, but we don’t need to worry too much if it’s never going to happen.
You look out at the hall. There are wine buckets and trailing cables everywhere. The hall looks more like an assault course than an awards evening. Quivering slightly, you turn back to Dave.
“You’re the expert, Dave, what should I do?”
“You need to address the root cause of the risk,” says Dave. “You failed to make it to the stage because you are knocked out, because you hit your head on an ice bucket, because you tripped over a cable. If we solve the cable issue, we address the risk.”
“Genius!” you cry. But then you pause. How are you going to get rid of all the cables?
Sensing your rising panic, Dave steps in.
“There are five main ways you can deal with the risk:
“First, you can ignore it, if it’s really unlikely already low impact.”
“That’s not going to work,” you say. “This place is a death trap.”
“Okay, your next option is to transfer the risk. Usually, this would mean insurance but, in this case, you could simply get someone else to go and get the award for you.”
“No chance,” you cry. “I worked hard for that.”
“You could try eliminating the risk,” suggests Dave. “You would have to get rid of all the trailing cables, and possibly any other trip hazards, and anything you could bang your head on.”
“But that would mean clearing the hall, and I’m not sure we have time!”
“In which case,” continues Dave, “we can try and mitigate the risk. This means we reduce the likelihood of it happening, or the impact on your objective if it does. You could wear a helmet, for example. That would reduce the impact. Or you could try crawling to the stage. That would definitely reduce the likelihood.”
You nod vigorously at Dave’s sage advice.
“Wait,” you cry, “I’ve gone even better idea. If I leapt from table to table, I’d be well away from any cables, so perfectly safe.”
“That’s one idea,” says Dave, frowning, “but I think you’ve just introduced a whole load of extra risks, like skidding on a tablecloth, falling off a table and knocking yourself out on an ice bucket. To be on the safe side, I think you need a contingency plan.”
“What’s that?” You ask.
“A contingency is the answer to the question ‘what if it still goes wrong?’ This doesn’t change the likelihood of an event occurring, but does reduce the impact if it does.”
“Ok, if I skid on a tablecloth, fall off and knock myself out on an ice bucket, my contingency plan will be for you to go and get the award on my behalf.”
“No chance,” says Dave, “It’s far too dangerous.”
It’s more likely you’ll encounter risk assessment during the preparation of a grant application than at a company awards ceremony, but the logic is the same. When I assess bids, the three biggest issues with risk that I spot are:
- Failure to address the root cause. Applicants will include risks like ‘Performance falls below customer expectations’ but then don’t explain what would cause this problem. As such, it is impossible to know if any risk reduction measures are appropriate.
- ‘Don’t Worry…’ Applicants will highlight a potential risk but then, as mitigation, say something like ‘This isn’t an issue as we have a world-class team.’ Having a world-class team mitigates the risk but it certainly doesn’t eliminate it, and you may need a contingency plan if your world-class team isn’t as world-class as you thought, or if an external factor influences events.
- Dubious risk scores. Typically, you will score a risk low/med/high for both likelihood and impact. A good risk register will then show these scores again after the risk reduction measures have been applied. Applicants often either score all their risks low/low (which makes you wonder how much of an issue they really are) or drop all the risk ratings to low after applying their risk reduction measures, even if they wouldn’t have that much of an effect. For example, a contingency plan will never reduce the likelihood and employee retention measures such as pay incentives will reduce the likelihood of someone leaving but never the impact.
A great risk assessment lends massive credibility to any bid, so spend time on it, follow the advice above and, if in doubt, come speak to us. Or Dave.
Pete Frederick is Chief Innovation Officer at Neon. An innovation specialist with 25 years’ experience, Pete helps clients across the whole innovation journey, from concept development to equity investment. Pete is also a published author in Persuasive Writing, helping clients communicate their innovations more effectively.
Contact Pete and the rest of the Neon team at peter.frederick@neoninnovation.co.uk