We need effective risk barriers, but which ones are truly needed, effective and animate innovation? And, crucially, are there multiple barriers protecting the same element but with different appetites? Adrian Clements, an international enterprise risk manager, has this advice.
Risk management in governance and compliance is important. We need to be aware of areas in our management structure and company culture that are exposed and where we are operating beyond our tolerance levels. We certainly need to know when we are noncompliant. However, there is potentially too strong a focus on risk, as opposed to opportunity. We talk about defence rather than attack. Too many duplicate checks and controls, or the perceived threat from the audit department of being “out of control”, can hinder our need to move forwards. I have personally seen millions of dollars being spent on things which address symptoms, not problems, and basically achieve KPI goals rather than animate the company to higher levels of success.
So which barriers are truly needed? Which barriers are operative? Which are animating innovation? The management structure needs to cope with both open and closed barriers. Ie those that help defend the company and those that act as catalysts to open doors to opportunity.
These are the most widely known. So which ones are working? Which are redundant? Where do we have multiple barriers protecting the same element but with different appetites? This is a different question than “which ones are present?”.
By combining the concepts in the articles 2, 3 and 4 we can identify those management and process safety barriers that are key to influencing the EBITDA stability and Enterprise Value within the company. If these barriers are efficient and working then all other elements, controls, we put in place are redundant. And they cost money to implement and maintain. Through the use of driver trees, we can:
- Establish where, and which, barriers have multiple effects
- Clearly identify the owner of that barrier
- Quantify the value the barrier is protecting
- Ensure they are operative.
Today, in many companies, there are multiple barriers in place on sometimes non-key items and in many cases the important barriers are not identified or working. The reason; the value being protected is not known and the true owner not clear.
An example from one audit company was a fence surrounding a facility to stop theft. This was considered an important physical barrier that had to be implemented immediately. Naturally within a few days the fence was broken, theft continued. Focus on a barrier that could be checked easily but was of low efficiency.
A closed locked door is a barrier. I don’t see what’s behind it and without a key I won’t be able to open it. An unlocked but closed door can be opened if I know the door is there and my company culture allows me to open it. Through an open door I can see beyond and make decisions if I want to go there or not.
Barriers to opportunity are arising mainly from the company culture and the leadership style we have created. Animating the people to be creative, to challenge, to think differently will need to become the norm if we wish to have a company with open doors. The top 5 opportunity barriers are shown in the graphic.
The system needed to create transformation includes:
- Idea capture from a top down and bottom up facilitated brainstorming sessions.
- Open and creative work environments and acting on ideas generated
- Incident review to capture knowledge and strengthen the problem barriers rather than symptom issues.
- Ideas and concepts Challenging
- Ensure alignment between long- and short-term objectives
By implementing this system we achieve multiple goals.
- Create team spirit
- Achieve a feeling of ownership and achievement throughout all management layers
- Collect a plethora of ideas which can be used to take the company Forward
- Identify which actions are actually destroying value
- Proliferate idea exchange which become the driver of Change
- Foster a culture change from procrastination to entrepreneurship
Through the integration of these two barrier methods we have multiple effects at different levels of the business.
- A value focused business model based on a system rather than siloed processes.
- Sustainable EBITDA capture and creation
- Transparent ideas originating at all levels of the Company
- Experience capture strengthening knowledge Retention
- Forward focused company culture supporting sustainability
- Transformation leading to enterprise and stakeholder value.
What’s remaining, summarising the 5 articles in this series, is the transparency of action prioritisation and action ownership.