Let’s talk strategic risk for a few minutes. Organizations of all sizes and types face daily risks that fall outside of the “insurable” risk space. The news is chock full of stories about rogue traders, failed mergers, currency conversion implosions and the like. I’m reminded of the story back in the 60’s when GM tried to sell the Chevy Nova in Latin America, only to realize that Nova means “No Go” in Spanish. (Of course, the story is bogus but is makes a great illustration)  What about the reputational risk of an oil rig disaster only to find out that whistle blowers had been complaining for some time about the potential for failure. What we learn from these stories is that Strategic Risk Management is almost impossible in a “Top Down” scheme.

The ivory tower just cannot be expected to understand all of the risk facing the “boots on the ground.”   Strategic Risk Management must have a bottom up component or, to quote Molly Hatchet, “you’re flirting with disaster every day.”  The facilitation of bottom up strategic risk management requires collaboration tools that heretofore did not exist. But imagine this scenario:

Technology is put in place that continually polls the people closest to the front lines about risk that they face in their particular function. Easy interfaces are presented that facilitate rapid updates of the details of these risks. Electronic conversations are started between the Top Down risk experts and the Bottom Up operational experts regarding things like likelihood, potential severity and possible controls/mitigations. Risk owners are assigned, plans are logged and connected to the risk and the owner and the plans are scheduled for periodic exercise and/or update. Of course all of this activity is logged and organized in reports, dashboards and heat maps and is available in real time to the Board of Directors.

Of course, one of the side benefits of this scenario is the avoidance of one particular major insurable risk that is of great interest to the board… D&O claims by the shareholders.   The good news is that this technology exists and is being used today by your peers.