Sadie – The Risk Dog

Sadie - The Risk Dog

I’m pleased to introduce my new risk management mascot, Sadie, a Belgian Malinois or Dutch Shepherd. She joined our family in July after we lost our shepherd mix Dusty. Sadie is a rescue dog from the local SPCA so she came with some emotional baggage (don’t we all?). This breed is often trained as police or personal protection dogs since they are smart, agile and quick. Her former owner trained Sadie for personal protection but she was trained compulsively so she follows her commands out of fear, not to please us. Therefore Sadie is afraid of a lot of stuff.  Thunderstorms turn her into a quivering bowl of dog gelatin while seeking cover under anything (including me or a piece of furniture).

I see correlations between Sadie’s behaviors and the actions organizations take to manage risk. As a fearful dog she is volatile and becomes aggressive quickly. She is very protective of us (that was what she was bred for – to protect sheep from predators). Consequently I am always slightly on edge, vigilantly trying to identify any threats that will send her into her crazy dog state. Sadie doesn’t like people on bicycles, skateboards, scooters or inline skates (seeing a pattern?). When she sees a skateboarder she goes berserk, barking, running in circles, jumping and won’t listen to commands (I had a manager like that once). But if I get her attention before crossing into the “red zone” I can influence her behavior. Similarly an organization that identifies and manages its risks before a loss, can also avoid chaos.

To further complicate things, Sadie was taught her commands in German which we uncovered when we met a woman that knew Sadie from her former life. We couldn’t figure out why a “trained” dog wouldn’t sit, stay and lie down. After a Google search for German dog commands we could finally talk to Sadie and have her respond. Keeping with the risk management analogy, risk managers often speak a foreign language (Klingon perhaps) – risk, exposure, risk or loss  control, loss prevention, peril, not to mention insurance-speak. It’s my job to translate my risk language to your business language so we can work together and accomplish a lot.

Follow the adventures of Sadie as we deal with her behavior issues and risk management. She graduated recently from Basic Obedience Training and begins her advanced training soon. Anyone who has ever trained a dog knows it’s the human that is being trained not the dog. So I have a lot to learn. Sadie will have her own Twitter account and eventually a Facebook fan page. Look for her barks (tweets) and words of wisdom.

 

Turning a Manufactured Risk into a Risk Management Technique: Social Media

Many consider the use of social media as a very risky endeavor while others think this is a “manufactured risk” used as a reason not to engage in social media. After assessing the threat to your reputation, social media is not a risk – manufactured or otherwise – but rather an excellent technique for managing this exposure.

My most recent post, Social Media, Risks and Urban Legends: What are you afraid of?, discussed the term “manufactured risk” coined by Jeff DeCagna of Principled Innovation, LLC. A “manufactured risk” is one everyone talks about, worries about and takes to the extreme even though the risk is not that severe. I compared it to an urban legend – there is a grain of truth but the risk takes on a life of its own. The loss of control of your brand due to social media is a manufactured risk.

Peggy Hoffman of Mariner Management & Marketing asked in her comment to my post “. . . I too was struck by the wor[d]k risk and his great defn of manufactured risk. Maybe there are 3-5 questions we can ask ourselves to determine if a risk is manufactured or real – your thoughts?” Not  one to back down from a challenge (unless it involves possible bodily harm), a risk assessment can transform a manufactured risk into a “manageable” one (another of Jeff’s risk terms). In a risk assessment you:

• Define the risk
• Analyze the risk (frequency and severity)
• Set your risk priorities

Define the risk

Losing control of your brand is not the risk since you never controlled it either before or after the arrival of social media. The best you can do is manage your reputation. John Eckman wrote in his blog, Open Parenthesis that:

Your brand is not what you say it is, but what your prospects, customers, partners, and employees say it is. In short, your brand is what the Internet says it is. You influence this not through marketing but through creating appropriate experiences and getting users exposed to those positive experiences. (Micro-interactions are ultimately assembled into and become brands).

The real risk is damage to your reputation by whatever cause also known as reputational risk. As you define your reputational risk which , consider:

• What are the values exposed to loss? Your reputation.
• Perils causing the loss. The main peril is someone publishing damaging information about your organization such as an expose or the disclosure of an awful incident (allegations of child molestation, employee embezzlement, product recall, or death at your facility). Reputational risk existed long before social media (i.e., United Way of America, The Nature Conservancy).
• Financial consequences. A damaged reputation can have significant financial consequences. Negative public relations or media coverage can lead to decreased revenue due to loss of members, donors and sponsors and reduction in donations, conference attendance, certifications, and advertising. Your expenses may also increase because of unexpected legal fees, advertising costs, and hiring public relations consultants to help with the crisis.

Risk analysis

After defining the risk, you identify the potential frequency and severity of the risk to set priorities for managing each risk. Frequency is an estimate of how often a risk may occur, you can assign one of the following grades:

• Almost nil – Extremely unlikely
• Slight – It could occur but hasn’t
• Moderate – Happens once in a while
• Definite - Happens regularly

Severity defines the potential financial consequences of a risk – you can either keep or retain (pay for) the risk or need to transfer the financial risk to another party usually an insurance company.

• Slight – You can retain the loss, the financial consequences are insignificant.
• Significant – You can’t retain the entire risk and must transfer a part of it.
• Severe - You must transfer the whole risk as it poses a threat to your survival.

Based upon the assigned frequency and severity grades you rank the order in which you address each risk. An exposure graded with “definite” frequency and “severe” severity needs to handle first.

For most organizations the reputational risk frequency level will be “slight” however a controversial organization may assign a frequency grade as “moderate” or even “definite.” The severity rating will be between “significant” or “severe” depending upon the nature of your organization. Base your ratings on an incident receiving significant media coverage; not when “someone says something bad about us.”

Conclusion

Social media enables your organization to monitor what people are saying/writing about your organization, employees, competitors and industry so you can prevent an incident evolving into a crisis. Justan Kownaki supports this benefit in a Social Media Club blog

No one controls their brand, but social media allows you better manage your brand’s perception in real time. More importantly, it helps you understand what others are saying about you (and why), so you can identify any disconnect between what YOU think your brand stands for and what OTHERS think your brand stands for.

Additionally social media is crucial to your crisis communication plan by minimizing the adverse impact on your reputation. An analysis of the recent recall of Maclaren Strollers offers insight into the benefits of social media in a public relations/media crisis. Jeff Rutherford in his blog, Using Social Media for Crisis PR – What Maclaren Could Have Done Differently, offers an excellent road map for how Maclaren could have used social media to handle its product recall better. Maclaren could have used Twitter, Facebook and reach out to parent bloggers to convey its concern about the recall and how to order the hinge covers to prevent future finger amputations.

So instead of being a risk (manufactured or otherwise), a well-designed social media strategy with tactics is an excellent technique to manage your reputational risk. Use social media to listen for what people are saying and crafting your response. Be sure to update (or adopt) your crisis communication plan to include social media to garner its benefits.

 

Social Media, Risks and Urban Legends: What are you afraid of?

Jeff DeCagna of Principled Innovation, LLC spoke at the ASAE Social Media Workshop on November 6. His talk, Connecting Social Tools to Organizational Strategy and Capability focused on how important strategy is in your social technologies efforts.  His second question in Jeff’s Top Ten Social Strategy Questions for Association Leaders got my attention with the word “risk.” How much business risk are we willing to accept? Risk assessment is an important part of any strategic discussion not just social technologies.

Manufactured Risk

Jeff defined three types of risk – manufactured, manageable and momentum. Manufactured risk caught my attention because the perceived severity of a manufactured risk often causes an organization to not pursue a specific strategy because it’s too risky. A manufactured risk in one that everyone talks about, worries about and keeps them from acting. The risk is usually taken to the extreme, worst case scenario threatening the organization’s survival. To me people repeat the concerns so often the risk takes on the persona of an urban legend . Urban legends are neither false nor true but usually have a grain of truth as does a manufactured risk. But people don’t analyze the exposure to decide if the potential outcome is truly that awful or devastating. People just use the manufactured risk as a reason not to do something.

They’ll say bad things about us . . .

The most common reason (manufactured risk) an organization resists social media is that “someone may something bad about us, our members, clients, sponsor, etc.” The grain of truth is that yes people will say something bad about your organization or members – it is inevitable – not everyone will like what you‘re doing. The exaggeration is that the comments will cause irreparable damage possibly leading to its demise. Damage to your reputation is a risk that you can and should be managed, but the final outcome is rarely the end of your organization. When an organization does fail it is due to inherent structural or cultural faults that existed before the bad press.

Wendy Harman , Social Media Manager of the American Red Cross (ARC) , spoke at the workshop and helped debunk this manufactured risk. Wendy joined the Red Cross in late 2006 when Hurricane Katrina was still a trending topic. Her task was to stop people from saying bad things about ARC on the internet. However when Wendy began listening in the 400+ mentions of ARC each day the majority were very positive. According to Wendy in an interview with John Haydon, “People are more generous and more willing to engage than we gave them credit for being. Now, we’ve been able to figure out how to start building an online movement of people empowered by us and themselves to make a difference.”

What to do . . .

To prove this to yourselves and your bosses do both a Google and Twitter search for your organization’s name, acronym and industry topics to see what people are saying about you. I think you’ll find most comments are positive or a worse case no one is talking about you. It’s better to know what they are saying so you can respond appropriately. A quick review of public relations and marketing failures such as United Breaks Guitars, Amazon.com’s snafu with listing its gay, lesbian, bisexual and transgender books in the “adult” category and the “Dell Sucks” campaign were the result of the companies not responding to criticism by its customers. Greater damage is done by not responding or replying in a defensive or patronizing way. A quick and honest response goes a long way plus your members will come to your aid. Don’t let the manufactured risk of “bad public relations” keep your organization from engaging online with its members and other stakeholders. There are bigger risks to manage than this one.

 

Associations, Polar Bears and Risk: What’s your risk strategy?

Welcome to my blog! Read my musings on associations, nonprofits, risk, strategy, leadership, management, insurance, my dogs and other things of interest. This posting mulls the passive attitude many of us take towards managing risk. Hope you enjoy and come back often.

As a risk management consultant, call me crazy but I think risk assessment and mitigation (aka risk management) should be a part of all business decisions especially strategic ones. However in my experience most associations and nonprofits don’t do a very good job with incorporating risk management into their planning process or daily operations. Oftentimes an event, program, service or activity is deemed “too risky” without the benefit of careful analysis. Even if the activity is risky you may be able to mitigate the risk to make it acceptable. On the flip side an association can take a course of action that really is too risky or a poor fit with its mission.

Why do people and organizations have such a hard time assessing risk? Risk by its nature as the possibility of loss or harm has negative contentions – we don’t want to be wrong, fail or cause harm. But risk taking is necessary to move forward and be successful. Without a structured process to assess and mitigate risks you fall victim to your often flawed perceptions of risk. John Ross in his book The Polar Bear Strategy recounts a tale of being on an Arctic expedition with five other people when they happened upon an area recently visited by a polar bear. The group discussed its options in the event of a polar bear attack but couldn’t decide what precautions to take. “Out on that tundra, because the six of us couldn’t agree on the severity of the risk of meeting a bear, we neglected to come up with a strategy. Instead, paralyzed, we chose the worst possible course of action: to do nothing at all.”

Before seeing signs of the polar bear, Ross’s group had not discussed its bear plan although encountering a polar bear in the Arctic is not an unusual risk. The group had a rifle (because the bush pilot required them to take one) but kept it stored in a duffel bag and it is unclear if anyone had any expertise shooting a rifle. In retrospect a dumb idea not to be prepared but they all lived to tell the tale and John wrote a book about risk. So how can we avoid making a similar mistake as we run our organizations?

Risk management is a format to identify and analyze risks followed by selecting ways to mitigate the threats. We still tend to abdicate our business and personal risk decisions to fate. We tend to be optimistic people we don’t like to think about the bad things that can happen. Plus the process seems rather tedious and boring. But stopping to determine what could go wrong, evaluate the probability of an event occurring and identifying ways to manage the risk can be interesting exercise. Risk management helps you identify the potential obstacles and create ways to overcome the problems rather having a bad experience that derails or destroys a new initiative. Consider it as a part of your planning process.

All those Boy Scouts can’t be wrong with “Be Prepared.”

So what’s your polar bear strategy?