Innovation and Risk

Innovation requires risk taking. Taking risks requires informed, fact-based decision-making.

This is my favorite risk management quote although I don’t know the author but credit my friend, David Mair for sharing it. People are always talking about innovation and association leaders are striving to design the association of the future. I’m not creative enough to answer that question but I do have some thoughts on the innovation process.

The problem with innovation is you don’t know the outcome until you try something. Your results will fall somewhere between total failure and complete success. Although we talk about the need for failure (fail fast, fail often) no one likes to fail particularly when your boss or board are watching. However as Sir Winston Churchill said, “Success is the ability to go from failure to failure without losing your enthusiasm.” We need to try many things to figure out what works best.

It is risky to be innovative, to change things up but using risk management techniques may make these risks, well, manageable. Risk management is a way to deal with uncertainty – the possibility that a future event will affect the organization. The event’s effect can be positive, negative or neutral. The risk may be a show stopper or can be easily managed to make the new idea successful. The dilemma is knowing how to tell the difference; to decide which risks are manageable. Many people think risk management is the school of “no” but it can make an idea even better. How? During the planning and design process if you assess the risks you can take steps to improve your chances for success. Unfortunately, most people don’t analyze and manage the risks early enough in the process.

Several years ago while helping a client decide whether to develop a captive insurance program, some senior managers shared a new initiative. The new program was a radical departure from their normal operations and a stretch for their mission. They were going to collect and sort used clothing to sell to another party (no retail sites). The idea was close to the implementation before anyone thought to identify and evaluate the risks associated with this new venture. I offered a short list of the risks I saw and the insurance implications (encouraging them to talk to their insurance agent). During our brief discussion the client recognized the need for a risk assessment. I thought the idea was a little crazy (too far from their mission) but the risks were manageable with the right resources committed to the project. I wasn’t involved in any further discussions of this initiative but the organization never pursued it. I like to think my little intervention helped improve their decision-making.

Since innovation is all about risk taking:

  • How do you decide which risks to take?
  • What is the risk appetite of your association?
  • How much risk will your senior management and/or board tolerate?
  • Does your risk tolerance and appetite vary by program/service/department?
  • Have you ever asked these questions?

Establishing a risk management policy or strategy is a great place to start as you tackle innovation within your association. Let me know how you do with this task.

  1. Risk Management as Change Agent: Adopting a Culture of Risk « Risky Chronicles

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