By Melanie Lockwood Herman
If you’ve ever served a pie whose crust was tough instead of flaky, you may have overworked the dough before baking. This frequent error can happen when you’re mixing the dough or when you’re rolling and shaping it. Experienced bakers learn that a light touch is the secret ingredient to memorable pie. This week—in between baking for a family celebration—I’ve been pondering the tendency to over-process risk management.
In an article from MIT News titled “How the brain assigns objects to categories,” Ann Trafton writes, “The human brain is adept at recognizing similar items and placing them into categories – for example, dog versus cat, or chair versus table.” Additional brain research has found that grouping or ‘chunking’ information supports efficient information retention and retrieval, effectively ensuring that human brains can store as much as a million gigabytes. In the NRMC team’s experience, risk leaders are eager to organize their risks into categories, despite the often frustrating nature of this task.
While reading Steven Johnson’s book, Where Good Ideas Come From: The Natural History of Innovation, I began thinking of a new frame that might be helpful to group and catalog risk strategies simply and spur action. Rather than spending excessive energy identifying potential risks, I want teams to quickly move to talking about the essence of risk management: action in the face of risk. My new light-touch frame consists of two approaches:
Approach 1: Alter your Trajectory
The first category of strategies consists of actions a team will take to get out of the path of an oncoming risk.
Examples include:
- Evacuating and relocating residents of rental housing units in the days prior to a hurricane making landfall.
- Implementing changes in working conditions, compensation, and benefits in response to employee ‘stay’ surveys.
- Proactively moving essential software systems and databases to the cloud and converting to ‘paperless’ record-keeping to fortify against events that would prevent staff from working in customary locations where onsite servers are located.
Approach 2: Ready for Reality
The second category of strategies consists of actions a team will take to manage through a risk it cannot avoid.
Examples include:
- Creating a CEO Succession Plan describing specific actions the board and staff will take when, inevitably, the CEO leaves.
- Determining which programs will be scaled back (and how) or temporarily shuttered should circumstances (think funding loss, staff shortage, extreme weather) make it impossible to continue those programs at full capacity.
- Identifying and training a backup for every essential position at your organization and periodically practicing a hand-off of these critical duties to build confidence and competency should an unexpected absence or departure occur.
Time to Practice!
Take our self-assessment to explore the degree to which your nonprofit is prepared to avoid OR get out of the way of 6 commonly named, worrisome risk events. Click the button below to get started!
Use our worksheet to group existing—and future—risk management action steps into two categories.
Melanie Herman is Executive Director of the Nonprofit Risk Management Center. She welcomes your questions about categorizing risks and your stories about finding the secret ingredient to your nonprofit’s risk management approach at 703.777.3504 or Melanie@nonprofitrisk.org.