In this age of uncertainty, no business can be too prepared.
And according to Deloitte, having an answer to 10 key questions can mean the vital difference between success and shortfall.
“High stakes uncertainty can take many forms. It can be a major acquisition down the road, or an actual industry disruption,” the professional services firm said in a report. “For the prepared organization, uncertainty can provide an opportunity to put distance between themselves and their competitors.”
Whether crisis strikes, dynamics shift or there’s a threat to your brand, companies that view risk more broadly than “just compliance” will have better foresight, be able to seize opportunities and come out stronger than the rest.
Here are 10 questions to consider.
1. What risks are my biases creating?
Just as humans are hardwired, companies can be so set in their ways as to get in their own way.
Instead of turning to tried and true responses, it’s sometimes necessary to step back and look at the bigger picture.
Consider, for example, your company is confronted with a product failure. “You immediately focus on lapses in engineering,” Deloitte explained. “This is fine, but you may have lost sight of the bigger picture, which is a loss of customer trust. In this case, we see the ‘narrow framing’ bias at work.”
It’s important to seek outside views from unexpected sources for certain issues, and to find people both inside and outside of the company who will “call foul on your thought processes,” according to Deloitte.
2. Am I acting decisively when I see change around the corner?
Change can be a pain for most organizations, and the dilemma many face is whether to scrap a business when change is coming or to navigate big decisions in an uncertain business environment.
You may be able to anticipate potential problems for your business, but beyond just anticipating, companies have to decide when to take arms and then be confident in doing so.
“Good leaders put in place mechanisms to scan the environment and understand its ramifications,” the report noted. “Great leaders act on what they see. They are not Hamlet, paralyzed by indecision. There is no gap between knowing and doing. They mobilize entire organizations in the direction of an unproven future. They make big bets and seize changes before those changes overtake them.”
3. Who digs in and challenges the assumptions in my strategy?
Every company needs a devil’s advocate to balance the common assumptions and beliefs individuals and organizations as a whole undoubtedly have.
“That person or team can surface blind spots, offer alternative perspectives, challenge assumptions, counteract organizational myopia, and build resilience into the strategy,” Deloitte noted. “Appointing one in your organization can go a long way to giving you confidence that the decisions you make are the right strategic choices.”
4. Are we always looking for reasons to say no?
The ‘if it isn’t broken, why fix it?’ mentality can come to bite successful companies in the rear.
“If you’re in an organization that’s financially successful, you’re the category leader, and the vibe is status quo, chances are that 90 percent of the energy is spent defending why you shouldn’t do something,” Deloitte said.
Doing nothing doesn’t work anymore and companies need to be sure they are taking enough risk.
“What if you start evaluating big strategic decisions not only in terms of the risk of doing something, but also in terms of the risk of not doing anything? What is the impact on revenue, market positioning, brand and competitive advantage if you don’t change?,” the report posed.
5. What’s our reputation worth and who owns it?
Reputation is perhaps one of the biggest risks to a brand’s business, and with the prevalence of social media and the speed and reach negative news can have, the damage that can be done to a reputation can be even more devastating.
Companies may consider reputation management the job of a public relations person or team, but because reputation goes to the heart of the business, a brand reputation program should start with senior leaders (chief strategy officer, chief risk officer, chief marketing officer) working together to “enhance, protect and preserve” the company’s reputation.
“That program should engage employees as corporate ambassadors, constantly look for gaps in what is promised vs what is delivered, and invest in systems to monitor and track external feedback across stakeholders,” according to Deloitte.
6. Am I prepared for a crisis? Really?
Even though retail and supply chains have been roiled with issues of safety, workers rights, data breaches, building collapses and the like, most senior executives still aren’t properly prepared for crisis.
Companies may be hard pressed to spend precious time planning for things that may never happen, but failing to do so could me more costly—both financially and reputation-wise.
“Preparation starts by having an enterprise crisis plan as well as plans for specific scenarios: market changes, regulatory issues, lawsuits, activist shareholders, customer concerns, cyber threats, and natural disasters, to name a few,” the report noted. “Then the prep continues in rehearsal, using simulations and war gaming techniques. This step is critical: By practicing real-time decision-making in a risk-free, yet rigorous environment, executives build confidence and develop a certain muscle memory they can automatically rely upon in any novel situation.”
7. Do I know who’s ready to lead during a crisis, and am I honest enough to say I may not be?
Not all executives are created equal and not all are meant to handle a crisis or explain anything to the media about said crisis (take Chip Wilson).
“While making preparations and rehearsing are critical, you need to identify who from your executive team is capable of leading under extreme duress,” according to the report. “Don’t forget to leverage the wisdom of your board. They have likely seen a crisis or two in their lifetime and are uniquely qualified to provide input on the skills needed and the executives who are ready to navigate a crisis.”
Companies should only rely on leaders who have gone through crisis training and demonstrated that they can make decisions under (even simulated) stress.
8. Will I use a crisis as a force for change?
When a crisis inevitably happens, companies should use them as transformative events, opportunities to fix things that aren’t working.
“Because a crisis exposes all the rot, it’s a cathartic event and an opportunity for change. You finally got scared, could see clearly, and perhaps realized you need to do a 180 in your organizational beliefs, culture, mindset, values, and processes—all things you could not do before.”
9. Is my risk team giving me the confidence I need to make high-stakes decisions?
Executives tend to leave risk to the risk managers, but when the risk managers do jump in, their recommendations can be seen as obstacles that don’t connect to the business or that aren’t seen as adding value.
“Risk is often set off in a corner and condensed into a compliance-oriented rather than a consultative role,” the report noted. “The risk function should be embedded within the business rather than sitting on the sidelines as a policing function.”
Risk has to be more than one team focused on compliance matters, it has to be a group of leaders in the business providing expertise and consultation.
10. Am I engaging our board’s expertise to navigate uncertainty?
Companies need to bank on their board members’ knowledge more than they do.
They may be prepping presentations and sharing heaps of information, but more time in meetings tends to be spent on presenting those materials than having useful conversation.
“This approach is outdated and wrong. They’re not called a board of directors for nothing,” the report noted. “Don’t be afraid to use the board as a check on your decisions. Be confident enough to know that you’ve got blind spots, so engaging some former CEOs in a real conversation might bring you some much-needed new insights.”