Risk Management

Realising Improvement & Transforming Perceptions

Two key factors are essential to ensuring that an organisation is competitive and achieves long-term success.

  • Their ability to produce quality products and/or services is measured by the efficiency and effectiveness of their processes
  • They are able to manage their risks effectively, so that they avoid negative outcomes and damage to the image of the business.
  • When executing a business improvement program, many organisations neglect to manage associated risks. Or, they don’t realize the impact of risk management on their operations. Both process improvement and managing risks are dependent on factors that the organization can influence.

  • Partnerships
  • 1. Internally between groups or teams

    2. Externally, between clients, suppliers and other stakeholders

  • Resources – this includes using the skills and capabilities and assets of staff and the ability of an organisation to leverage its financial muscles.
  • This article is a “thought-piece” that explores the interrelationship of these two “Rs”, (“Risk Management” & “Resources”), and two “Ps,” (“Processing” & “Partnerships”)

    “R2P2”

    Change your perceptions

    A growing realization is being made, especially among larger organisations that Risk Management offers more than just compliance. It assists in the effective management and monitoring of all risks an organisation is exposed (e.g. operational, financial and reputational risks). When managed well, Risk Management can be a powerful tool for organisational improvement.

    Six Sigma and Lean improvement techniques are very popular in the private and public sectors to support organisational improvement. While they can improve organisational effectiveness if used correctly, they can also create risks for the organisation and its value chain. As such, there is an increasing awareness that the promise to achieve improvement is often not realized.

    As part of the process of improving Process Improvement and making effective use of risk management, it is important to establish and manage effective relationships among groups, individuals and organizations.

    Maintaining Improvement

    A recent study has shown that amongst the supply chain of Nissan a large percentage of the organisations surveyed had struggled to realise the benefits from their improvement activities (such as Lean & Six Sigma) and through this had introduced additional risks to the organisation.

    Below are the main reasons for failure to deliver expected results. They are grouped under the “R2P2” categories.

  • Resource issues
  • 1. Insufficient resources are not allocated to deliver the project effectively

    2. Insufficient or inadequat training

  • Risk Management Issues
  • 1. Inability to coordinate organizational improvement activities

    2. Poor project management or implementation

  • Partnership issues
  • 1. It is difficult to get the support of staff and partners to participate actively in the process.

    2. Lack of commitment and management support

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  • Process Issues
  • 1. Poor selection of tools or an inadequacy approach

    2. Communication problems

    These results correspond with previous work by the authors in NHS and service sector. Therefore, although they are derived from manufacturing sources, they also have relevance to public and service sector.

    Effective partnership management, process improvements, risk management, and resource management are all key ingredients to sustainable improvement.

    R1: Effective Risk Management

    A lot of times, an improvement program will not be fully explored before it is started. This can lead to unexpected delays, increased project costs and lower performance.

    It is often overlooked that improvements made in one area of an organisation, or in the supply chain, can cause problems downstream or upstream, or even within the entire organisation. To ensure that improvement projects are successful, it is important to understand the operational impact of any activity across an entire Value Stream’ (or Pathway in the NHS).

    All aspects of organisational improvement should be governed by risk management. This includes assessing the impact of changes made on operational performance and analyzing the organisational effects of delays or changes to projects, such as lost sales, broken relationships, and reduced profits.

    R2: Effective Resource management

    It’s almost obvious that having the right resources available to your team is crucial to your success. These resources can be assets, knowledge, skills, system or financial. But having the right resources is not the same as deploying them efficiently.

    Planning for the right resources available is an art in itself. This can also bring with it secondary issues such as timing and deployment. But, understanding the requirements for improvement and how they will be used will make improvements stick.

    P1: Effective Process Improvement

    Lean and Six Sigma, or Concurrent Design for new products and services development, often place a lot of emphasis on the tools and neglect the whole process. This creates isolated areas of activity, or ‘Islands of Excellence’, that have little or no effect on the overall value stream’. It can also lead to unacceptable risks and degrading internal and external relationships.

    Structured improvement is more effective than just picking out ‘pieces’ of the problem. It involves clearly defining what must be done and why.

    This structure allows team members to easily assess the effectiveness of their improvement plans without having to impact on performance.

    Warning:

    Organisations can’t rush to make improvements (the “magic bullet”) and end up destroying the entire tree.

    P2: Partnership Management Effective

    Many improvement programmes focus on the process or technological aspects of an activity. Although the team is often involved, they are rarely empowered to deliver the activity. It is possible for an organisation to implement a program without consulting its partners from the start.

    A lack of communication or coordination between partners or teams working on different parts or within related organisations when working across value chain values can lead to conflict, confusion, repeated activity, higher costs, and the possibility of missing important elements or steps.

    Sometimes, the coordination between partner/team activities is poor. If the problems between partners or teams reach a point where they are too severe to resolve, trust will be broken.

    It is crucial to understand who must be involved from the beginning and what authority each person will have to avoid problems later on in relationships.

    R2P2 – Improvement Success

    As we review R2P2, it will be apparent that there is high interdependence between them.

    Making the Switch to R2P2

    Our goal was to show how effective project management and sustainable organisational improvements can be achieved by combining Process Improvement, Risk Management, and Partnership working alongside the Resources. These are our top 10 tips for improving organisational performance in any improvement program:

    Ten Recommendations

    For organisational success in improvement programs.

    1. Clearly define what you want to accomplish. Identify the risks that you may face, the partners involved, the resources required, and the actions that you will take. Effective risk management does not mean minimizing them.

    2. You should look at the project or improvement project from the ‘End to End” perspective (using Value Stream Analysis processes) to identify and understand the potential risks and impacts.

    3. Start by engaging and inspiring people, including partners, to get involved in the process. Then empower them to do the same.

    4. Once you have identified the ‘End to End” improvements, risks, and impact, it is time to take immediate action to generate quick wins.

    5. Sustainable improvement is more than just a process change. To achieve this, you need to change your behaviour over time. Management support and encouragement are key.

    6. It is important to involve the right people (yours, and your partners) at just the right moment in order to ensure that the right issues are addressed and that the right outcome is achieved.

    7. Continue to communicate with your partners and people – It can be difficult to convince people you chose the “Right Way”, particularly if they perceive greater risk. People will perceive greater risks when they are not sure what the future holds or have yet to experience it.

    8. To prevent disasters from developing, it is important to deal with communication and relationships problems early.

    9. Keep in mind that it is better for you to make an improvement of 80% now than to do the same thing later. Second, learn from your experience.

    10. Be positive and embrace failure when you are on the road to improvement.

    molw.net

    We are a team of professionals with each having two decades of experience in start-ups, sales, marketing, finance, HR, large scale project and profit centre management and running mature cross functional operations. At Molw.net we are big believers that knowledge transfer is critical to our industry’s evolution. We love to share our experiences and learnings through our online resources.

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