Risks are part of business. So we need to know how to successfully avoid risks. That means that first of all we have to acknowledge the risks facing our projects and whole enterprises. ‘Positive Thinking’ doesn’t eliminate risks, it just naively ignores them. Looking for the risks isn’t ‘negative thinking’; it’s the opposite! It’s only by anticipating risks that we can deal with them and avoid them. That’s the way to achieving success.
Risk Management involves identifying risks, prioritising the most important ones (the potentially most damaging ones) and then dealing with them in advance. This means either eliminating the risk altogether or at least minimising it.
Have a Pre-Mortem
A creative way to successfully avoid risks is to hold a “pre-mortem”. In contrast to a post-mortem that asks after the event “What went wrong?!”, a pre-mortem envisages disaster in advance – in order to avoid it.
This excellent article by Ryan Holiday uses a story of a company CEO surprising her executive team by predicting failure before the launch of a product. She holds a pre-mortem. The article is about ‘Negative Visualisation’, which sounds like the opposite of what a successful business should do. (Very “un-American”!) However, big companies in the USA and world-wide are increasingly using these techniques effectively – to successfully avoid risks.
In the creative industries, cultural enterprises and digital startups, passion often overrides risk assessment. We can easily develop a collective mindset of optimism and ‘positive thinking’ that avoids any recognition of risk. Such an organisational culture makes it impossible for anyone to even speak about risks. That’s a recipe for disaster. We need a counterbalance to optimism – the art of negative visualisation.
There are various techniques for assessing and managing risk. The simplest and most effective is to give each potential risk a score which multiplies is it’s potential negative impact with its likelihood of occurring. Give each element a score out of ten (for negative impact; then for likelihood) and you will get a score out of 100. [For example as risk that is 8/10 potential negative impact but only 2/10 likelihood of actually happening will get a score of 8×2 = 16. A 16% ‘risk score’. Chances are, there are higher-scoring risks that we will need to prioritise and deal with first.]
This is a simple but effective method for identifying and focusing on dealing with risks. Sure, there are more sophisticated methods but this is a great starting point that everyone in the business can engage with.
David Parrish helps creative and digital businesses to become even more successful by combining their creative talent with smart business thinking. He works internationally as a business adviser, keynote speaker, trainer and writer.