Every organization has a reputation . . . some good, some bad.
Executives rise or fall with those reputations, too.
What about reputation itself? People worry about it. They defend it – even in court. But how does an organization’s reputation really get started?
Reputation is created! Who are its creators? Decision-makers whose values and priorities about managing risk build a framework that creates a reputation. Like love and marriage, risk and reputation go together.
Though it seems obscure – even mysterious, reputation develops in one of two ways. Either it is consistently formed – or it has to be restored after it’s lost. Both involve risk. The key to both is successful management of risk.
A long-standing excellent reputation can seem fixed and stable – but be destroyed in a moment . . . by a single unexpected act or occurrence!
Consider the luxury cruise liner Costa Concordia now lying capsized off the Tuscan island of Giglio. Only a small deviation from its programmed route caused it to slam into a reef and roll over! Instantly wiped out was not only the reputation of its owner Carnival Corporation but the entire popular cruise ship vacation industry’s reputation was impacted as well!
With that evaporated reputation went depressed stock value, major financial loss, immediate lawsuits, cancelled cruises and embarrassing news media coverage.
In contrast, the now-famous but nearly disastrous Tylenol product tampering case proved resilient against impact. Its reputation was in sudden jeopardy. But by excellent foresight about risk – realizing a criminal act could destroy its reputation, Tylenol was able to rapidly implement pre-planned re-packaging that preserved the company’s reputation.
Recovering reputation – after it is lost – is a different ballgame. Will Penn State football ever regain the reputation Coach Joe Paterno took a half-century to create?
Once a good reputation collapses, crisis managers typically rush in like emergency physicians to resuscitate and restore it. But reputation recovery takes more than apologies, explanations, and panicked reaction. Inherent but overlooked risk must be systematically identified, evaluated, ranked, and controlled.
So a good reputation emerges as one more advantage of systematically keeping on top of all risks! And every CEO and Board Member will enjoy the benefits. Fight on -- risk managers everywhere!
Presidential campaigns are interesting, intriguing -- but enigmatic. They dominate TV, radio, written news and the Internet. You can’t avoid them. But why this wild hoopla? Because getting elected is risky!
If there ever was a “make or break” business, seeking public office – especially the Presidency -- involves high risk. The stakes are enormous. Mud-slinging fills the air – all in the name of clarification. Sudden-death for one is sudden-glory for the other. No one gets “a little bit” elected.
Looking down from Mars, you would be perplexed at these gladiators. Hundreds, millions – if not billions of dollars are spent to make political opponents look risky, unworthy of investment.
If Risk Management is effective, politicians should be its prime user. Yet, the insurance industry doesn’t dare enter that field. Though it invented the phrase “Risk Management,” it’s a well-kept secret that it never actually manages risk – it only finances it! So insurance isn’t a solution for political risk.
Vetting – originally a horse-racing term for a veterinarian to confirm a horse was healthy enough to race -- is a frantic two-sided search to protect a candidate while inflicting major damage on all its opponents. It is likely the nearest primitive cousin to political risk management.
But political risk is not limited to politicians!
There’s the electorate – those mythical folks that seem to hold the keys of success – the power to either empower or destroy candidates. Ironically, it simultaneously creates and inherits its own high risk. Whether it elects a “no previous experience” contender or a “fully experienced” one, risk of disappointment abounds.
Dead people voting? Live folks prevented from voting? Some voters voting twice? These unanswered questions plague the purity of plebiscite – raising the risk of deceit, deception, and delusion.
Is it time for Risk Management’s traditional “identify, analyze, rank and control” methodology to be adopted for political risks?
After many years of dilly-dallying, conducting hearings, and being pressured by a concerned public – the FAA has finally and officially recognized something that even a child understands.
Tired pilots are a risk when flying aircraft.
Was that a surprise? Who could really argue with that obvious verdict? Why did it take so long to decide it? What should be done about it? How can that risk be avoided?
The root of this seemingly clumsy, slow, and maddening process of managing risk is conflict – not about the risk itself but what to do about it. The FAA has the nasty job of resolving that conflict.
Society is complex. It consists of folks with many differing interests. So airlines, pilots, passengers, aircraft controllers, medical experts, airport managers, aircraft manufacturers, and trade unions among many others potentially have “an ox to gore” in reducing the risk.
Pilots suffer three types of fatigue – transient, cumulative, and circadian. The first is acute fatigue resulting from extreme sleep restriction or extended hours awake within 1 or 2 days. Cumulative fatigue is produced by repeated mild sleep restriction or many hours awake for a series of days. Circadian fatigue is reduced performance during nighttime – especially between 2 and 6 AM.
So how tired should a pilot allowed to be—before the risk is too high? How will we know the pilot is that tired? What has to be done to prevent tired pilots from flying? Who will enforce prevention of tired pilots being required to fly?
The FAA issued a 314-page rule to answer those questions. But don’t relax yet.
It only governs pilots of passenger airliners! Those flying cargo aircraft are exempt!
So . . . more “bits and pieces” management of aircraft risk . . .
“What God hath wrought,” the first telegraph message ever sent by its inventorSamuel F.B. Morse, needs to be re-phrased – “What Steve Jobs hath wrought,” Dr. Vernon L. Grose said in an interview yesterday on CTV’s flagship show, Canada AM.
Job’s iPad has revolutionized communication. Everyone seems to be captured by the ubiquitous iPad – to the point that they cannot stop using it. “I wonder if they even take it into the shower with them,” Grose, a former NTSB Member, mused.
The latest iPad fuss occurred when American Airlines announced that they are going to use iPads instead of paper flight manuals in the cockpit -- even during takeoff and landing. But passengers still must shut down everything electronic from the moment a plane leaves the gate until it reaches an altitude of 10,000 feet.
That revelation blew the fuse of many iPad users who feel they must never be told to stop using those magic devices. They act like children who’ve been denied candy before dinner.
“We are in a three-way collision between technology, personal liberty, and risk,” said Grose—author of best-selling MANAGING RISK: Systematic Loss Prevention for Executives.
Airliners may look like nothing more than great big metal machines, but they are quite electronic – even being described as “fly-by-wire.” iPads definitely emit signals that can unintentionally affect aircraft communications, navigation, flight control and electronic equipment. Why would passengers deliberately risk their – and everyone else’s – lives so selfishly?
As technology continues to produce communication marvels, iPad entrancement may give way to even more devices with potential interference with aircraft performance. Enforcing a ban on their use aboard flights is virtually impossible today anyhow – given that people are very clever at hiding them.
This battle between personal liberty and community safety goes well beyond airline travel, as demonstrated by this week’s call by the NTSB for banning cell phones and texting devices in all automobiles.
By Dr. Vernon L Grose
Dr. Vernon L. Grose is the author of Managing Risk: Systematic Loss Prevention for Executives, and the founder and chairman of Omega Systems Group Incorporated, which helps organizations manage risk.
Executives face unprecedented uncertainty today, and much of it is unthinkable: an oil spill of unprecedented magnitude in the Gulf, a deadly crash on Metro when an automatic train-control system goes haywire, a lightning strike of a business in a summer thunderstorm that seemed to come out of nowhere.
All of us are ill-equipped to handle the unthinkable because all of us are experts at suppressing the negative. When the unthinkable is woven into the fabric of daily living, it easily loses its identity. Yet decisions must be made in a milieu that includes the unthinkable.
How can an executive navigate successfully through a range of risks? What can be done when those risks threaten to negate obvious opportunity? Why do we erect an "Unthinkable Barrier?"
I see at least three reasons:
- We believe that we lack the financial or psychic resources to face the unthinkable. Should we take time to address the potential of disaster, we fear that we would become dysfunctional in our existing work.
- We think that by concentrating on maximizing opportunity, we can outweigh or offset the unthinkable loss. We think, "I can stay ahead of the accountability curve by running fast! The impact of ignoring the unthinkable won't hit for years."
- We believe that by acknowledging the unthinkable, we bring it into existence. So, it is better to just let it happen, even if it devastates us.
We penetrate the Unthinkable Barrier in five ways:
- We suffer a major loss. However we have managed to shut its possibility out of our mind, it bursts into full reality. An example is the death of a spouse, child, parent, or friend.
- We accept the reality of the unthinkable through someone else's encounter with it. For example, we buy disaster insurance after an uninsured competitor is wiped out.
- We experience gradual erosion. If enough implausible events occur enough times, these break down what we had always believed to be unthinkable.
- We engage in contemplation, perhaps during retreats in a remote location. However, unless action follows such mental exercise, the Unthinkable Barrier is not pierced.
- We adopt a mindset that regularly faces the consequences of the unthinkable. This destroys rather than punctures the Unthinkable Barrier. Using this approach during Project Apollo contributed to the success of those six manned missions to the Moon.
Mature executives examine all factors that influence success. Everyone's "bottom line" is the sum of opportunity's benefits minus risk's losses. To ignore even a portion of the latter because they are unthinkable is to contribute to the uncertainty.
Alarmists often use risk to intimidate, frighten, and incite. In deploring this misuse, we must not overlook the true reality of risk, that which executives ignore to their peril. Prudence suggests watching for three clues:
- Delegating all evaluation of corporate risk to subordinates, staff, or agency.
- Being so busy with opportunities that no time is spent on associated risks.
- Delaying any consideration of risk until all resources are allocated.
At the outset, we must identify every conceivable risk ahead of time, using a systematic method that is global in perspective.By applying systems methodology to risk termination, you can remove your Unthinkable Barrier and take charge!
Instead of letting disaster sneak up, you can "think the unthinkable." Risk examined isn't nearly as bad as risk repressed.
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