MANAGEMENT
anagement is effective risk management.
Bold statement? Over-simplification?
Maybe, but consider the proposition more
closely.
Effective management in the realm of
business involves being concerned with
the downside of uncertainty and planning for its potential
consequences, while simultaneously understanding whether
a course of action will provide long-term benefits. Unfortunately, our management practices have become so focused
on short-term controls that practitioners often lose sight of
long-term possibilities. Yet success in almost any endeavor
comes from recognizing opportunities, placing bets on potential beneficial outcomes and appreciating the upside to
uncertainty.
Those involved in the business of management need to begin thinking differently, and the discipline of enterprise risk
management can help.
M
Considering Uncertainty
We encounter uncertainty from an early age. As infants we
are inquisitive, in a state of mixed wonder and awe at our
surroundings. Our concerns are generally focused on immediate needs. However, as we grow, our perspective broadens.
And despite increasing uncertainty, we consider and appreciate the future implications and opportunities of our actions.
As with personal development, the discipline of management needs to mature from its infancy, with its dominant focus on short-term results. We need to challenge stale assumptions about the future in order to recognize and appreciate
the importance of long-term value. Managers must begin to
make more decisions based on the upside of opportunities,
rather than allowing anxiety over short-term uncertainty to
create paralyzing inaction.
Yet it seems our management models are falling short.
We’ve forgotten to ask the most important question: Will
today’s decisions lead to our desired future? When we for-
The M in ERM
A missing strategic ingredient, as viewed
by health care industry risk professionals.
BY DENISE ROTATORI AND RALPH STORTI
