The Future is not an Extrapolation of the Past

by | May 23, 2022 | Strategy, Risk Management

Measures that are common to many areas of an organisation, such as turnover, training, and other human resources measures, may track company performance well in relatively small business units but track it very poorly when measured at the higher levels.
The successful identification and application of effective Key Risk Indicators (KRIs) require a structured approach. Crucially it involves systems thinking, looking for patterns and connections, examining knock-on effects and shifting the focus between individual parts of the system and the system as a whole leading to heightened exposure to a continuously changing pattern of risk.
The hard truth is we all leave a lot of value on the table – value that we could seize with better decisions. Doing so requires a company-wide framework for making them. Specific, factual, information about what creates effective execution in the business is vital to decision making.
Few would dispute the importance of intangible assets but it can be quite difficult to measure them and even harder to communicate their value to stakeholders. An audit is a way of making capabilities visible and meaningful. It helps executives assess company strengths and weaknesses, assists senior leaders in defining strategy, supports mid-level managers in executing strategy, and enables frontline leaders to make things happen. It helps customers, investors, and employees alike recognise the organisation’s intangible value.

Organisational Mindset – The Strategic Context

The release of King IV report and the updates to the COSO, ERM and ISO 31000 standards emphasised the need to address risks in the context of organisational objectives and decisions and the ability to respond quickly, decisively and effectively to unforeseen and unpredictable forces have become an enterprise imperative.
Businesses make decisions under dynamic conditions. Changing variables may demand course corrections at any time. The practical application to management decisions throughout organisations still presents significant challenges involving as it does; the building of an executive-led, risk-aware organisational mindset as a decision enabler that can raise and optimise organisational value.

The Requirements for a Risk-Informed Decision-Making Process

We live in an age that seeks quick fixes and easy answers. Sometimes leaders abdicate their thinking to others and accept “prevailing wisdom,” which is often an oxymoron, leading to making assumptions based on other people’s ideas – not supported by facts. When leaders stop accepting things at face value, they realize some truths they believe turn out to be serious leadership myths which in turn leads to them adopting more dynamic planning, scenario analysis, and risk-informed decision-making processes to address risk events and business opportunities as they arise.
Just as a financial audit tracks cash flow and a 360-degree review assesses leadership behaviours, an audit to measure how well the company delivers on its strategy by using its inherent, intangible assets – the source of real competitive advantage.

Integrating Management and Decision Making

Integrating management and decision making is about (1) people using (2) decision-making processes ingrained with risk management principles and (3) the best information available while leveraging, accelerating and optimizing decisions and their outcomes.
In this context, risk-aware decisions require a system of people, process, information, and technology resources guided by a measurement framework. The InnoDynamiX Meridian System is such a framework which can be used to monitor long-term organisation survival and success.
The InnoDynamiX Meridian System provides business leaders with the measurement (index) and insights into how well the main drivers of value creation are aligned and perceived by their organisation.
The InnoDynamiX Meridian System provides a validated, qualitative and quantitative baseline and helps to facilitate a dialogue among the business management practitioners through inculcating a common language and cross – silo partnerships to advance the unique management disciplines at the core of efficient enterprise decision making, incorporating the realities of operating in highly dynamic market conditions.

Conclusion

Ongoing validation and review are essential to assessing whether business strategies are continuing to perform as expected or whether new limitations have arisen.
Effective decision-making processes should not focus on risk mitigation, but rather risk optimisation in pursuit of business objectives. The business concepts used in risk management decision making processes should eventually blend into everyday business decision making, add value to the enterprise as well as reduce risk helping to convert static enterprise planning and strategic decision making to a dynamic, proactive practice better aligned with the reality of constantly changing business conditions.

InnoDynamiX Management Systems

InnoDynamiX Management Systems assists companies to develop and implement an innovation process – enhancing their business’ dynamic capabilities & potential.
We offer a focused, ecosystem of business professionals and specialists, delivering outstanding management support in the pursuit of innovation and sustained relevance demanded by today’s highly competitive business markets. Our key differentiator is our dedication and unique approach to the management of innovation.

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