All public and private organisations must deal with the systemic risks of our complex world. However, such inherent complex risks are difficult to manage even where significant resources have been utilised in implementing formal risk management frameworks and related processes.
It is therefore important for organisational leaders to actively explore new methods to enhance the contribution of risk management processes when they are trying to reach their objectives, says Prof Hermien Zaaiman from the Optentia research unit of the North-West University (NWU).
The behavioural approach that she and her team have towards risk work is based on insights from established literature and 53 organisation-based qualitative and quantitative risk culture-informed studies, conducted with their master’s-degree and PhD students between 2015 and 2021.
This research has led to novel insights into how to improve organisational risk management and deliver practice-based research findings that enhance the value of risk management initiatives to organisations.
“Our MCom Applied Risk Management and PhD graduates work in the public and private sectors, so their studies allow access to actual risk management experience,” says Prof Zaaiman.
For example, she analysed 1 897 management and non-management responses from her team’s survey-based studies in the South African public and private sector in 2019 and 2020 to identify priority areas for improving the inclusion of risk in organisational decision-making. The study respondents agreed that holding managers accountable for including risk in their decisions is the top priority to improve the contribution of risk management to organisational success. The next question to explore will then be: “How does one hold a decision-maker accountable for a decision relating to an uncertain future event?”.
Based on the study findings, such exploration will be informed by applied research in certain priority areas, namely how organisational leaders approach risk work, how risk is communicated by the organisation, plus, crucially, how well the concepts of risk and risk work are defined and understood by the employees and other stakeholders in the organisation.
Wide-ranging research delivers usable results
The studies covered multiple sectors, which included chemicals, financial services, insurance, marketing, mining, telecommunications and higher education, as well as state-owned enterprises and national, provincial, and local government departments.
“Being able to do applied research in such wide-ranging fields has allowed us to develop a generally applicable, practice-informed approach to daily organisational risk work. Rather than 'risk management', we use the term 'risk work', coined by the influential risk researcher Prof Michael Power of the London School of Economics in his 2016 book, RiskWork,” explains Prof Zaaiman.
She says Prof Power advocates that organisational stakeholders and researchers move away from focusing on analysing the causes and impacts of recent disastrous risk events in their attempts to improve organisational risk management. Instead, he recommends increased attention on how stakeholders process risk as an integral part of their everyday work.
Prof Zaaiman explains that a risk work approach allows researchers to investigate how organisational stakeholders make decisions that ultimately determine the entity's readiness to avoid and manage risk incidents.
“Organisational leaders must continually make risk-related decisions in changing complex environments. Therefore, organisational stakeholders must understand the opportunities and limitations relating to including risk when decisions are made.”
In addition, the team’s research takes a behavioural approach to understanding how people view uncertain events when making decisions. “We therefore also build on the extensive body of knowledge on inherent human biases and mental shortcuts, or heuristics, to explore the use of decision-making tools to mitigate such biases. For example, we study the implementation of pre-mortem analysis to assist senior decision-makers in including uncertainty in their decision-making processes.
“As opposed to a post-mortem on an already failed initiative, a pre-mortem exercise allows organisational leaders to envisage the failure of an initiative before it commences. This process serves two purposes, namely to identify what may go wrong and to prepare for such negative events before deciding to go ahead with a project. This exciting and relevant research allows us to advise organisational leaders on optimising their risk-related efforts, and we welcome research-informed consulting enquiries,” says Prof Zaaiman.
Prof Hermien Zaaiman is an associate professor in applied risk management at the School of Economic Sciences in the Faculty of Economic and Management Sciences, and can be contacted via the Optentia Research Programme or the Centre for Applied Risk Management.
Prof Hermien Zaaiman