Risk Management Version 3.0

RM tiger

The business world is changing so rapidly that companies are either not willing to publish growth predictions or they are getting it wrong. In this new world trends can’t be analysed from historical data. The best business analytic teams fail because the new business models have totally different risks. Moreover, now the risks are interconnected and can’t be addressed separately. An operations risk may have a huge impact on financial risks.  The old compasses are useless and most are walking on uncharted territory.

This is the ideal time for risk managers to shed their old avatars and  become new super heroes of business. First they have to get out of their comfort zone of addressing internal risks that are preventable. The compliance and control based approach leaves over 60% of the risks un-addressed. If we consider that Risk Management version 1.0, we need to rapidly move to Risk Management version 3.0.

So what does version 3.0 look like?

1. Focus on Strategic Risk Management

I consider Enterprise Risk Management frameworks approach as Risk Management version 2.0. Though they covered strategic risks the focus was on finance, processes and technology. Hence, in reality it has become a bottom-up approach though the initial purpose was to make it top down. Risk managers are still not involved at strategic level and it is the Chief Strategy Officers who are analyzing strategic risks.

My guess estimate is that we depute less than 10% of resources to strategic risk management. We need to put in processes and resources where approximately 25% of efforts are focused on strategic risk management. Strategy failure probability has increased in present business environment.  For managing strategic risks reduce  probability of occurrence of assumed risks and effectively manage them if they occur.

2. Focus on Human Behavioral Risks

Industrial age focused on mechanization and streamlining of processes. Products were produced on the assumption that human behavior can be straight jacketed. In the age of technology and social media, this assumption has proved false.  Social media and data analysis allows behavioral analysis of each individual.

Secondly, the bigger challenge the world is facing is of changing demographics. In the last few decades, the average age has changed from 60 years to 75-80 years. The older generation lives longer and works longer. The Gen Y is entering the workforce with different expectations. Women have not only broken ground in the corporate world, but have become main decision makers for household purchases. Emerging market customers and employees have different behavior patterns.  The leadership skill sets have changed drastically. Participative and consultative cultures are more successful now.

Therefore, whether an organization wishes to fight  war of talent or entice customers, understanding human behavior has become crucial. Each segment of employee, customer and other stakeholders present different risks which an organization needs to manage successfully. Without addressing these risks at strategic and operational level, an organization is unlikely to succeed.  Risk managers traditionally haven’t focused on people, leadership or culture risks. In this century they need to.

3. Integrate Risk Management Knowledge & Resources

The traditional approach of having different experts of financial, operational and other risks in separate departments and addressing each risk in a linear manner is redundant. Moreover, now businesses are significantly exposed to external risks, which was not the case before. The Vodafone and Nokia tax cases are prime examples of risks occurring due to change in government stance.

Risk Management version 3.0 requires integrated risk management where risk managers with diverse skills can assess inter-related risks – internal and external. Secondly, risk managers have to be available within the business and as a separate department. The risk managers operating as part of the business unit need to identify the business risks and update the risk management department. The department needs to devise holistic solutions.

The risk management tools, technology, processes and resources all need to restructured to operate in an integrated manner at all levels.

Closing Thoughts

I suspect, group think is prevailing among risk managers. No one wishes to be a bull in a china shop and say – “hey this isn’t working.” It is ironic that risk managers are not doing adequate risk management of their own role and function. Old habits die hard and getting out of the comfort zone is scary, but I think we need to do it. Else, business failures are going to increase at a high rate. In the current economic environment, we can’t afford those losses. Think about it and share your views.

Wishing all my readers a very Happy Holi.

Happy Woman’s Day – Wishing More Power to Women

women wearing

Whatever a woman wears shocks some man on this earth. A bikini-clad woman will most probably shock Indian urban male sensibilities, a burqha-clad woman will shock a French man, and a woman wearing a ghoonghat would shock an American. Still people judge a woman by what she wears. In patriarchal societies, character and sexuality of a woman is the same thing. Chastity, virtue and good character of a woman are prime importance. Men do honor killings in its name. What purpose do they serve? If women are not supposed to have sex with men, then is society promoting gay behavior?

In India, a country that was progressive in before Christ era, the situation has deteriorated with each passing century. India is the 4th unsafe place for women in the world. Times of India reported that in Bangalore, 64% women feel unsafe to commute at nighttime. In rural India, situation of women is worse. They do not even have an education. Women face physical, emotional and psychological abuse every day.

1.      Virginity & Sexuality

The propaganda is that Hindu mythology books –Ramayana and Mahabharata – define the ideal woman. It is convenient; Sita the female protagonist in Ramayana is the ideal woman. Mahabharata depicts characters that are more realistic. For example, Draupadi, the heroine of Mahabharata had five husbands. In present day, men definitely can’t accept polyandry. Her mother-in-law, Kunti, gave birth to a son, Karan, before marriage. Her three sons after marriage were from different fathers as her husband was impotent. Draupadi was publicly disrobed and it is the men who are projected in negative light. The book shows both Kunti and Draupadi in positive light.

Presently, in Indian society looks down on women having sex with different men or having a child before marriage. Mahabharata was depicting a time period of 10th century BC, and we call ourselves broad minded.

2.      Marriage and Dowry

One of the most negative customs in Indian society is that of dowry. As a good girl of Indian society should have an arranged marriage, her parents have to pay a big fat dowry to get a bridegroom. A woman is supposed to let her parents choose her husband.

In ancient India, the concept of Swaimwar existed. The parents of the girl would organize a Swaimwar, inviting eligible men for the marriage of their daughter. The daughter could run tests on the men, and choose her own husband. Even kings had to take rejection gracefully when they attended a Swaimwar.  It was the woman’s choice, and neither the parents nor the participants could change the decision.

Rape was punishable in some cases with death and in all situations; a woman’s consent was required for sex. For sex or marriage, a woman did not need her parent’s permission and could independently decide.

Women received “Stridhan” (wealth of a woman) at the time of marriage. This money and property was given to her by her and her husband’s relatives to use in case of emergency and/or on death of her husband. Even her husband was not entitled to use the money generally.

However, now the girl’s parents are pressured to give money to the bridegroom’s parents, and the girl doesn’t get any of it. In some cases, in rural India, if a girl chooses a lover or husband, she is killed to retain family honour. Rate of female infanticide is high because parents don’t wish to have liability of a girl. Tragically, the olden concepts have been twisted to fulfill power and greed.

3.      Widowhood, Divorce and Re-marriage   

Widowed and divorced women are socially excluded, as they are considered unlucky. Both are a social stigma. Hence, remarriage of divorced or widowed women is difficult.

It is incredible, that Kautilya’s Arthshastra defines the conditions of divorce, desertion and widowhood. He also mentions the period of separation and remarriage for divorced and widowed women. Islam and Sikhism accepted divorce and remarriage since inception.

The social custom of sending widowed and deserted women to temples to live a life of abstinence was more of an economic need than religious requirement. Even Sati (wife burning herself on her husband’s pyre) was a way to save money, in the name of chastity and virtue. Widowed and deserted women then would not require significant monetary support if it is propagated that they should not live a life of luxury.

Again here, the social customs were twisted to suit monetary ends. The tragic part is that these are done in the name of religious mandate. Hence, few would challenge the customs openly. We need to change the mind-sets to succeed in a global environment. India can’t succeed when 50% of its population is tied up in such draconian customs. Let us focus on independence and liberation of women in this century.

Closing Thoughts

Well, one can only argue with men up to a point. So I thought let me be open-minded and consider their perspective. Maybe one can decide a character of a person by the clothes they wear. I need a little bit of help form my readers. Could you look at the following pictures, and tell me which man has the best character. I am not blind yet, so I could figure out who looks the sexiest, but drastically failed at assessing character.

men character

Wishing a Very Happy Woman’s Day to all my readers.