I just exited the grocery store, threw out my latex gloves, took off my mask, and removed my protective eye wear. I never thought going to the grocery store would be a high-risk event. After applying some quick hand sanitizer, I jumped in my truck and started driving home when NPR’s Marketplace with Kai Ryssdal came on the radio. His first segment covered why many publicly traded companies stopped offering guidance to the market to understand their future performance expectations--because leaders just don’t know. COVID-19 has created a global tornado and no organization can really guide where it will land. Interestingly, Marketplace reports this could be a good thing as it offers companies the opportunity to focus more on long term strategic planning. Now that is music to my ears.
I get home, debate if I should quarantine or immediately disinfect my groceries, and by this time I’m so mentally exhausted by the grocery shopping experience that I decide to let them sit for a few days. As I reflect on Marketplace’s comment of organizations taking the opportunity to focus more on long term strategic planning, I immediately think about the story of Wimbledon’s 17 year history of paying $2 million a year for pandemic insurance. Their payoff for the 2020 cancellation of Wimbledon will yield them $141 million. While that doesn’t even land at half of what their typically revenue is for the competition, it enables them to carry on with their business. Now that’s healthy strategic planning and risk mitigation if I’ve ever heard it. Granted, one could look back 33 years for now and if COVID-19 hadn’t happened, reflect on $100 million wasted by Wimbledon for insurance they never used. But that didn’t happen. This is precisely why we must manage strategy and manage risk. Otherwise we are at the mercy of our competitors and all the risks lurking out there.
The time for organizations to think about the unthinkable is all the time. I’m not suggesting we all become paranoid leaders but we must think beyond the quarterly financial guidance and reports. Strategic planning and risk planning go hand-in-hand. Organizations maintain relevancy and reduce risk of failure through strategic planning. Reflecting on organizational strategy right now, while we are in the crisis, serves as a beacon of hope that we will return to business normalcy at some point in the future. We need to take the lessons we are learning right now, document them, and incorporate them into a stronger strategic and risk plan.
So what can you do right now?
- First, outline your key goals, measures/key performance indicators (KPIs), and initiatives for your business. Use a 3 year time horizon.
- Once established, identify specific pivot points in the strategy that are necessary to weather the crisis at hand. This is your core strategy.
- Then identify the risks, key risk indicators (KRIs), and mitigation initiatives associated with your strategic goals.
- Finally, implement the strategy. Report, review, and iterate to ensure the strategy remains relevant and delivers the results you are looking for.
Major swings in financial markets, environmental disasters, and public relations crises can be defining moments for your organization. Lost business, cyber attacks, hacked personal and private information are all disruptions to operations and will hurt your organization’s reputation and have real economic costs. As we have come to learn today's crisis as well as those in the immediate past clearly expose the need for a more disciplined approach to strategy and risk management.
What should you do if you are the Office of Personnel Management (OPM), Target, Yahoo, or Facebook who have had massive cybersecurity breeches over the past few years? What happens if you are the CEO of Wimbledon and your entire year is focused on one two week event? While every risk can’t be avoided, you have a responsibility to do your best to identify and mitigate the key risks to your organization achieving its mission and vision.
ESM put together an ESM eBook: Risk Management and The Strategy Execution System featuring strategy guru Robert Kaplan, on how risk management can be better integrated into strategy execution. Kaplan introduces two important concepts: a three-level hierarchy of risk; and the risk indicator scorecard, a parallel to the strategy scorecard that he and David Norton conceived nearly two decades ago. Also included are risk management best practices as highlighted by Dr. Kaplan and successful Balanced Scorecard (BSC) and risk implementations from Bank of Tokyo-Mitsubishi and Jet Propulsion Laboratory.
Give it a read. Stay healthy. We will get though these trying times.