Managing Risk

There are many definitions of risk and generally these definitions relate to the negative consequences of actions or events for organizations and individuals. This is increasingly reinforced in public service environments in terms of elaborate risk management frameworks and a focus on risk-preparedness for organizations.

We generally think of risk as financial but of course it is much more: risk to reputations, risk to organizations, and risk to personal employment. Risk is often seen as negative as it is coming from events or actions beyond the control of an organization. The concept of managing risk implies that risk can be controlled and negative impacts mitigated. However, risk is also an essential ingredient when an organization sets out to address systemic issues faced by its operations and/or environment, accelerate positive changes and achieve desired outcomes.

Risk is an essential ingredient of change. Without risk it is difficult to foster a climate of organizational innovation. When innovating we can look at what other organizations have done and learn from them. But each organization will face unique circumstances when making similar changes and you will never know exactly what you will face. The risks are different because of the organizational capacity, the financial ability of an organization and the people who are charged with making the changes.

At Toronto Community Housing we set out four years ago on an agenda of transformation, and accepted that risk would be part of what we did. We knew we had to embrace risk. What we were not as prepared for was just how to do it. We learned as we moved ahead with our plans. I often hear that we embrace innovation and support risk at Toronto Community Housing – but in reality, we are often more comfortable with old ideas and fear failure.

1. Understand what is a risk for you and your organization (or try to bite off what you can chew)

It is impossible, by the nature of risk, to identify all of it ahead of time. But it is possible to frame it in a deliberate manner. Force yourself to acknowledge what might not work and why.

• Do you know the risks you will face?
  A good friend of mine once told me that all of the problems sitting on his desk started life as good ideas. Taking the time to think through each new idea and understand whether it’s something that has risk, and that the idea may fail to achieve the result you intend, may help you understand what can go wrong and prevent it. We often jump to a solution without fully understanding what it takes to get there.
• Can you afford to invest in an initiative and not succeed? Will this jeopardize your ability to deliver programs and services?
  This is the simple test of whether the price of failure is too high for your level of tolerance. It’s easy to assess financial risk but more difficult to assess whether there is organizational resilience to failure. Boards are particularly hard to read in this respect as they are more sensitive to the organization’s reputation and potential impacts on funders.
• Does your Board understand the risks you are taking?
  Your board must fully understand the risks involved in delivering a program. What are the ups and downs? It’s often tempting to paint a glossy picture of outcomes, but this inevitably introduces high risk for organizational leadership when things don’t work as planned.
• Are you taking risk to deliver on an organizational priority?
  Anyone in an organization has a limited amount of non-financial “capital” – so if you are the champion of an initiative or the sponsor of something that is identified as a risk, this capital should be reserved for what is a priority of your organization.

2. Support risk taking – really!

Embarking on something that has been identified as a risk to the organization needs the full support of that organization. Support starts with leadership – whatever the initiative, it must have the attention of those who have power and authority to keep things on track. This includes both the board, the senior management team, and in some cases, your funding partners. Support is also providing sufficient human and financial support to achieve a successful outcome. Launching an initiative with great hope and little sustainability is likely a risk strategy with little reward.

3. Pay attention

Getting an idea off the ground is simple. But inevitably there is the day-to-day work to keep in mind while dealing with the dual distractions of being over-worked and under-resourced. Achieving some success requires sufficient attention to the key initiatives you launch, and making sure that others in the organization are doing the same thing. There is no set formula for this; some prefer rigid project management systems, others less formal reporting. The key is that leadership is exercised throughout the process, and if staff or others are asked to implement an idea that they have the authority and support to do so. It is also important that in this process, error and failure is recognized as it is happening – and where success is not being achieved, pulling the plug is an option.

4. Don’t fall for your own story

We are almost all by nature defensive. When we are deeply invested with a new idea, we often do not hear what is said around us. When you’re engaged in something that you think carries risks for you and the organization, listen particularly carefully to those who disagree. Deliberately seek advice from those who have different points of view. Draw from the experience of others. You want to know when you’re headed off the cliff! As an executive director or senior manager, it will ultimately be your job to make the decision on the course of action to take but be critical and reflective. Do not always believe your inner voice, or those who depend on the success of an initiative. Falling for your own story compounds risk and is often a quick path to failure.

5. Celebrate success and failure

This is the most obvious idea, but inevitably the one that is most often missed. If you are in an organization that is willing to take risks, then there is an absolute need to recognize your successes. Celebrating these is a big reinforcement which encourages further innovation and supports risk-taking as part of your organizational culture. More importantly it makes sure people learn from failures and provides them with the assurance that failure does not mean pulling back from further risk-taking down the road.

Derek Ballantyne, CEO, Toronto Community Housing Corporation

Derek Ballantyne has been Chief Executive Officer of the Toronto Community Housing Corporation, the largest social housing provider in Canada and the second largest in North America, since 2001. He previously served as Chief Executive Officer of the Toronto Housing Company and prior to that was General Manager, City Living, City of Ottawa Non-profit Housing. Derek has also worked in the sector in a number of volunteer roles, including that of founding Board member of the Ontario Non-Profit Housing Association, and Chair of Raising the Roof, charitable organization dedicated to finding solutions to homelessness. He currently sits on the Board of Ontario’s Social Housing Services Corporation.

Five Good Resources

• Best Practices in Risk Management: Private and Public Sectors Internationally
• Enlightened Risk Taking: A Guide to Strategic Risk management for Nonprofits by Melanie L. Herman and George L. Head. Unpublished but adapted from the article Strategic Risk Management: Looking at Both Sides Now
• Exposing the Elephants: Creating Exceptional Nonprofits, Pamela J. Wilcox, John Wiley & Sons, Inc., New York 2006.
• Improving Quality and Performance in your Non-Profit Organization: An Introduction to Change Management Strategies for the 21st Century, Gary M Gobman, White Hat Communications, Harrisburg, 1999.
• Act on Facts, Not Faith,by Jeffrey Pfeffer & Robert I. Sutton, in the Stanford Social Innovation Review, Spring 2006.