Diversity in Risk Thinking

Give people the comfort they are doing something right

Bryan Foss, Diversity in Risk Thinking (NEDonBoard Webinar) May 2020

Managing risks in personal lives comes natural to most people. When it comes to businesses though, risk is at the top of the agenda of Boards and Executive directors. Yet, the word risk brings with it all the negative connotations, and we end up talking about all the risks that were not managed, that were missed, that caused disasters. People do learn from lessons, but who said these lessons should be always based on failed stories? why can’t we continue to learn from all the positives that has come from a solid objective approach to managing business risks?

NEDonBoard hosted a webinar in May on Diversity in Risk Thinking. Bryan Foss, a NED, Risk & Audit Chair, Visiting Professor and board readiness coach, Founding member of the Risk Coalition, and Chris Burt, Governance thought-leader, Co-founder of the Risk Coalition, Principal author of the Risk Coalition’s ‘Raising the Bar’, were the speakers of the webinar. The discussion was very informative and covered the core responsibilities of the Risk Committee, Audit Committee, Group Thinking and Diversity in Risk Thinking, as well as the core concept of diversity in this context. I have 3 top learnings from the webinar I was able to reflect upon from my own experience:

1. Group Thinking is Dangerous

During one of the conversations I had with Estelle Clark – Governance, Assurance & Improvement Strategist  at Strategic Arrow – late 2019,  she shared a valuable story about a situation that could shape up someone’s career. Having an expert in Quality is what is needed in organisations. Expertise in Quality as a framework brings diversity to problem solving, sometimes more so than the technical, sector specific quality experts. Something many companies fail to acknowledge and rectify. A construction company looks for a quality expert in construction, a hospitality company looks for quality professional with hospitality experience, and so on. While sector knowledge is valuable and beneficial, it could potentially limit how an organisation is looking at addressing certain risks. 

Roll on to this month, Bryan and Chris brought the topic of the group thinking to the webinar. What usually happens, which is human nature, is that a chair would end up bringing to the table Roll on to this month, Bryan and Chris brought the topic of the group thinking to the webinar. What usually happens is that a chair would end up bringing to the table people who think like them. Understandably, this makes discussions and decision making easier. While this is understandable, it becomes problematic if left unrecognised. A cohesive team works very well together no doubt, but that does not mean they should not challenge each other. Board members should be able to constructively challenge one another, and bring a wide spectrum to the point in discussion. This will allow the board to address a risk (or any agenda item for that matter) from different angles. Now, challenging one’s ideas does not need to take place in the form of disagreement. The mere fact that a different perspective is brought to the table should enhance the board’s ability to help guide or advise an executive team on a certain issue.

We all like it when people say Yes! Wow! Great! I Agree! etc… But with the responsibility the Board holds towards corporates, such praise on its own does not hold up. The Board has to be as certain as possible that issues were covered as widely as possible to support the sustainability of the company. Therefore, a chair should be conscious in bringing Board members with different skills who are able to positively challenge discussions and decisions, not just agree on everything. Here is something I learnt early in my career and try to apply every time I build a team.

During my tenure in one the financial institutes in the Middle East, I was asked to do one of the personality tests. There are plenty out there, but the one I was asked to do was called D.I.S.C. profiling. Human behaviour is classified in four categories: Dominant, Influential, Steady, Compliant. There were two aims for such test: self-assessment, and recognising others’ behaviours in the team to better work together. The message at the time was clear: when communicating with team members, make sure you cater to their style and not yours. Once I recognised this simple approach, my awareness on how to handle certain discussions, and challenge certain ideas started to become a little easier. When building teams, I started to make a conscious effort to hire members from the entire spectrum: ones who are ready to take a risk and make a decision immediately, and others who will always say ‘hold on a minute, have you thought of this’. These two different characters will at times frustrate each other, but nonetheless, they both need each other to eliminate any group thinking. Which brings me to my next takeaway from the webinar: Diversity in thinking.

2. Diversity is not only visible

Visible diversity on a Board that does not combat group thinking is not fully effective. This is in simple terms what the message of the webinar focused on. What is visible diversity? People with diverse background at the Board level are extremely important. However, diversity is not only gender, ethnic background, sexual orientation and age groups. The Board has to ensure that diversity is also brought from members’ skills, education, various sector exposures and different disciplines.

Representation is not Accountability

Chris Burt, Diversity in Risk Thinking (NEDonBoard Webinar) May 2020

Let’s say a financial start up has a Board in the UK with a balanced composition covering: age groups, ethnic minorities, genders, LGBT+, and other groups that reflect the organisation’s customer base. This is a wonderful effort to bring representation to the Board. Now imagine all of these members come with financial background and are either accountants, auditors, or experts in financial risks. A year into operations, the executive management of this start up began to experience issues with scaling up. What used to work with a smaller customer base cannot be sustained now. Quality Management in its scientific sense has no representation on the Board. The Operations team is still young (in experience) and lacks capability in identifying process stress points following methods such as Process Mapping, Ishikawa, Pareto and so on. The Board with its current set up and high representation of visual diversity will no doubt be able to draw upon experience, but will they be able to draw upon expertise in the field of Quality and bring fact based thinking to the problem at hand?

Having representation on the Board does not mean Accountability. The Risk Committee must work with the Chair and the Board to ensure that Accountability in bringing multi-dimensional and intersectional diversity to the Board.

3. Managing Risk is not a tick box exercise

Risk Registers, likelihood and impact, heat maps have become the talk of the season since this pandemic started. An Executive team with a strong administrative skill of keeping a risk register is much appreciated and necessary. But this remains the responsibility of the Executvie team. The Board’s responsibility is not to go through the risk register line by line. The key role an effective Board can have, is to drive a proactive discussion on what risks might face the company and how well prepared the executive team is in case a risk materialises. Driving such conversation by a Board that is diverse in the true meaning of diversity is much more effective and rewarding.

4. The Risk Coalition (Bonus Point)

The Risk Coalition network of not-for-profit professional bodies and membership organisations committed to raising the standards of risk management in the UK. They published a fantastic paper that brings 8 key principles to the Board Risk Committee. The principles are well structured and give good guidance to Boards or any other management team. Visit their website to download the paper for free, and when you do, let me know what principles quickly resonates with you. Mine were principles A1 & A6.

Have you experienced multi-dimensional and inter-sector diversity and effectively and proactively handled an organisation risk? I would like to hear from you.

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