In the past 20 years, “rogue risks,” such as a pandemic, have rocked risk management efforts and accounted for 92% of major sustained value losses in large organizations. Here are a few keys to successfully planning for and managing these types of risks:
- Create a risk radar. Have a team, including junior people on the ground who will see issues first but don’t know what they mean. Teach them what to look for and when to sound the alarm.
- Install mechanisms that ensure early warnings are heeded.
- Categorize rogue risks by the types of impact they have on you, your customers, your competitors, and your vendors. Prepare how to exploit entire categories, even if you don’t know the exact event that will happen. Start by thinking about the impact of different rogue categories on financial, operational, external, and strategic risks.
Managing rogue risks means constant vigilance. If your leaders or teams believe that the biggest risk they’ve faced in the past is the biggest risk they’ll ever see, they are setting themselves up for trouble. It is important to incentivize an “unhealthy discomfort” with ambiguity. Accept that while you can’t predict the future, you can plan for what might happen.
