Creating a Healthy ERM Culture – Part 5

October 2013 Feature Article

By Diana Del Bel Belluz, M.A.Sc., P. Eng.

This is Part 5 of a series of articles that define 12 cultural traits that are essential for a healthy risk management culture.

The earlier articles in the series covered eight of the 12 ERM culture traits (shown in green font in Figure 1):


Figure 1 - 12 traits of healthy risk culture

The 12 cultural traits support specific phases of the ERM Implementation and Organizational Learning Cycle. (For details on the cycle, see the Advisory issues of April 2011October 2011, December 2011March 2012).

In this article, I provide tips on how to promote two more of the 12 essential traits for a healthy risk management culture, i.e., being Prepared & Ready and Innovative.

Healthy Risk Culture Trait #9: Prepared and Ready

To illustrate the trait of being prepared & ready, I use the image of an Olympic sprinter at the starting line. The race may transpire in a matter of seconds but to qualify and to win, it takes years of preparation, including training and running in other competitions that simulate the Olympic experience.

The same is true for managers.  Managers often have very little time to decide how they will act when a new risk arises or when a risk transforms from a potential event to a crisis situation. To ensure that managers take appropriate action in that instant where the organization is depending on them, they need to prepare themselves.

A weakness of many ERM programs is that they focus almost entirely on identifying and assessing risks, and invest scant attention or resources into creating a state of readiness by:

  • Developing solid risk response plans.  Hope is not a plan. Neither is a vague risk response strategy.
  • Putting in place the capabilities necessary to execute their risk response plans. Too often, managers make overly optimistic assumptions about how well their people would respond to risks. Worse, they never test those assumptions.

How to cultivate it:

First, you need to make it a discipline for each risk to develop a solid plan that spells out what you will do when the risk materializes. Your risk response plans not only outline what needs to happen, but also define the roles and responsibilities for everyone who has a part to play in the risk response.

Having a plan is of little use if you don’t have the capabilities to execute it. So, the thing you need to is to

This includes communicating the plan to make people aware of their roles and responsibilities. It also means investing in developing the risk response capabilities necessary to actually execute your strategies and plans. This could include training your people, acquiring equipment, or establishing relationships with third parties.

The third thing you need to do is practice your risk response plan using role play, table top exercises or drills. In this month’s Bonus Resource, retired astronaut Chris Hadfield talks about the importance of simulating your response.

Simulation enables you to test your plans. You can pick a different risk to practice each time. Or you can make up a scenario by selecting some factors in your business environment and playing them out to their extreme. Or you can use scenarios based on past incidents or near misses. When a crisis befalls another organization, never miss an opportunity to explore, “Are we prepared and ready if that happened here?”

Rehearsing your risk responses is an excellent way to reinforce your people’s training and to deepen your understanding of your people’s true readiness. Another advantage of having your people participate in a simulation is that it can make them feel the discomfort of not being prepared for a risk. That creates an emotional motivation to improve that simply reading a plan cannot.

Finally you need to periodically adapt and optimize your risk response strategies to stay current with changes in your business environment.

Healthy Risk Culture Trait #10:  Innovative

The iconic image of innovation is a light bulb because it signifies a fully formed original solution (e.g., a disruptive technology) that appears in a single flash of brilliance. But that is not how innovation happens, at least not in organizations. Innovation is better represented by the image of the Wright brothers repeated attempts to get their new and untested plane off the ground. That’s because whenever you introduce a new idea or apply an old idea in a new way, the outcome is uncertain, i.e., it’s an experiment. And with any experiment, there is always a distinct possibility that it may fail.

An original idea is not enough for successful innovation. The true secret ingredient is a willingness to experiment with applying new approaches and a certain amount of tolerance of failure. Risk management will stifle innovation if it engenders or perpetuates an unhealthy fear of failure.

How to cultivate it:

Encourage managers to try new ways of doing things, including efforts to enhance the management of risk. The conventional wisdom in the field of innovation is that companies must make “1000 flowers bloom” to have one that is successful. Make room for creativity by allowing and encouraging experimentation and failure. For example, Ratan Tata, retired chairman of the multinational conglomerate Tata group recommends investing in an annual prize for the best failed idea.

“Failure is a gold mine for a great company.”  Ratan Tata, Chairman of the Tata group

Never look on failed experiments as career limiting mistakes. Rather treat them as a source of valuable information to be mined for designing future strategies. For example, even if your experiment fails, you will gain important insights about what to fix or enhance before you try again, or, indeed if the idea even merits a second attempt.

Define up front, what can be learned from the experiment. Risk management thinking can play an important role in innovation by identifying key sources of uncertainty in prospective innovations. This enables you to design the 'experiment' such that you can gain new information that reduces that uncertainty. It will help you decide if the innovation merits more nurturing or if it is time to let it die.

The Risk Wise bottom line…

To be prepared and ready to handle risk, you need a response plan, the capabilities to execute your plan, and you must regularly rehearse your plan. If you want innovation in your business and in your ERM program, you need to develop a tolerance for failure.

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My forte is pinpointing the best opportunities to truly optimize an organization’s unique ERM business practices and culture. For simple, pragmatic strategies to strengthen the ERM discipline and engender a culture of readiness and innovation in your organization, contact Diana Del Bel Belluz at Risk Wise at This email address is being protected from spambots. You need JavaScript enabled to view it.">This email address is being protected from spambots. You need JavaScript enabled to view it. or by telephone at (416) 214.7598.

Follow the links to:

  • Read this month's Bonus Resource - How an Astronaut Uses Risk Management Thinking To Make the Impossible Possible
  • Download a printable version of the entire October 2013 issue of the Risk Management Made Simple Advisory.
  • View the Article Index to access back issues of the Risk Management Made Simple Advisory.

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FIND OUT FOR YOURSELF why risk management leaders subscribe, click to access the ARTICLE INDEX of all past issues of the Risk Management Made Simple Advisory.

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Diana's Pick

Neuroscience and the Nonprofit Manager (written by Andy  Segedin and published in the NonProfit Times) shares some of the tips on how to counteract common biases and habits that impede effective decisions.

The article is based on a workshop that Diana Del Bel Belluz of Risk Wise presented at the 2015 Risk Summit organized by the Nonprofit Risk Management Center.