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Not all about risk…

September 28, 2018

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When we try to understand, interpret and plan for whatever the future holds then using scenarios and similar future thinking techniques are a great help. So why is so much of this about managing risk – and so little about searching for opportunity?

I have been struck over the past month, when working with clients in classroom settings and in their offices, by quite how focussed their thinking is on risk, risk management and risk mitigation. I suspect there are a couple of reasons – firstly, the general environment is distinctly uncertain. From the more global background issues of nuclear proliferation and climate change; to unpredictable presidents and Brexit, the rise of populism on the right and left of the political spectrum; to individual issues – in the UK at least – of a cost of living which barely keeps place with inflation to the increasing recognition among the young that houseowning may forever be beyond them. This is an environment of constant neurosis, so an increased sensitivity to risk is perhaps to be expected.

The second issue is more of our own making. Companies have Chief Risk Officers. They do not seem to have Chief Opportunity Officers. Companies have to make explicit provision for risk management; annual reports and public offering documents have to have overt risk sections. Compliance and health and safety functions are explicitly about the management of and mitigation of risk – largely regulatory risk, but risk nonetheless (and this is a separate issue – legislation introduces risk into a business, it rarely introduces opportunity).

It seems that the corporate world has become focussed on keeping what we have; managing risk to an obsessive degree; and in doing so in creating a mental model where opportunity comes second place.

This may be cultural. National models of risk tolerance vary substantially – it is a commonplace that no-one takes you seriously on Wall Street without at least one bankruptcy behind you, because it shows you are a risk-taker, whereas a bankruptcy in Britain is still seen as a disgrace – but in Europe risk is certainly seen as a pre-eminent factor.

Of course, one could argue that some of the global risks – electing a president whose public pronouncements seem occasionally odd, leaving a trading bloc for the insecurity of the wider world, and so on – are in fact the search for opportunity. This is a political judgement, though, created by unsatisfied, unlistened-to electorates by narrow margins, motivated by anger and a search for different routes forwards, and by themselves introducing risk into the system.

But back to the clients. Looking at their risk-focussed models, I was struck by how much opportunity there was in them. A burgeoning new technology is either a risk to your business or an opportunity to develop. The fall of one social class and the rise of another means a loss of existing customers and the appearance of others. Even futures which look at the outset to be almost dystopian contain within them seeds of prospects and openings where it is possible to create new markets, develop new products, take advantage of change in a positive way. Seeing furrowed brows round a scenario model turn to an understanding of an impending “aha moment” is very satisfying – but it requires an ability to see, or to be guided to see, the hidden opportunities.

With colleagues in SAMI, we have been thinking about what we are currently calling “positive futures” – lenses through which one can view scenario spaces as opportunity generation, as methods of thinking about the world and the business in ways which actively promote a clear-eyed view of success. Risk management in such situations become matters of risk acceptance – less of avoiding risk but mitigating it in a way which promotes what a former colleague of mine described as “rightwards and up”.

After all, if we are to make “robust decisions for uncertain times”, those robust decisions should be about succeeding, within and despite the times. An understanding of risk is important; an understanding of the opportunities hidden within those risks is key. We’re getting to grips with that at SAMI, and look forward to working with clients to grasp it as well.

Written by Jonathan Blanchard Smith, SAMI Fellow and Director.

The views expressed are those of the author and not necessarily of SAMI Consulting.

SAMI Consulting was founded in 1989 by Shell and St Andrews University. They have undertaken scenario planning projects for a wide range of UK and international organisations. Their core skill is providing the link between futures research and strategy.

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