Plan for Change: Securing Operational Risk Management
Posted by Jim Wickenden on Tue, Sep 28, 2010 @ 06:41 PM
My football team lost 5-0 last weekend. Crystal Palace, the dream team of the eighties, the moderate overachievers of the nineties and heartbreakers of the noughties lost horribly to fellow strugglers Derby County. With the same team that scored four just two weeks ago and a creditable draw last weekend, they (I) went down with a thud. Excuses abound. Well they were traveling to Derby and never play well away from South East London, the ref was biased, the linesmen missed a bunch of calls, the air was too thick and the weft of the grass was not conducive to their style of play. All well and good but what now? I am sure they have had their team meetings and had the regular post mortem film reviews- but really, what now? Dare I bet that there will be no changes to the line up next week? There is a good reason for this and plenty of history to back up my prediction. Who doesn't get a pang of coziness when a Spitfire flies overhead and why is the Tea Party so appealing in its name alone? We get a safe and fuzzy feeling when we look back but ahead, well, there be dragons!
There is a certain comfort in not changing anything, even after a disaster, and to lose 5-0 in any professional football arena is a disaster so let's not try to put a soothing spin on it. There will be words of encouragement and once in a while there will be a stern warning about "what might happen if things don't change," but I bet the lineup will be the same next week.
We can wait to see if I am correct in a few days, but "so what" I hear you cry. Well, apart from catching up with the football scores, I am in regular contact with heads of operations, compliance officers and operational risk managers and the constant theme I hear, despite this time of flux and turmoil, is "I am happy with what we have and do not plan any changes," or words very close to that effect. From a sales and development perspective it's all very frustrating but more than that it's a bit scary. Despite the sky falling down and being compelled by regulation to be more introspective and proactive in risk assessment and risk analysis, there is a greater temptation among decision makers to do nothing than to do, well anything.
From this trend I am hearing, I am compelled to take a further step back and let my philosophical juices flow. What is it in the human psyche that compels us to hold onto imperfection? Why do we think nostalgically and consider change an intimate attack as if we are personally responsible for everything that has gone before therefore to alter course is to admit defeat of even worse, admit we are less than perfect and were, in fact, wrong in monitoring risk?
If change is thought of as bad and will render risk into the realms of uncertainty and doom, then to remain stagnant must be thought of as good, pure and fiscally prudent, right? When you put it like that it seems perfectly acceptable that risk decision makers do less risk management, and as a corollary more risk taking, by failing to admit systemic flaws and doing something about them. But that seems to be largely the case. The argument seems valid in theory but the reality of doing little to improve flawed risk procedures is in practicality, ludicrous.
If I were addressing those experts in the financial industry, football or absolutely anywhere that any type of risk occurs- yep, that means just about everywhere, then I would say constantly plan for change. Do not plan to get it right but aim to get it as perfect as you can but assume it won't be. Base your risk analysis on the fact that loss events occur constantly and that perfection is impossible, then and only then will you be anywhere near the goal it seems many assume they have already reached.
Change is accepting the human condition that we are not perfect. Dare we say otherwise?