All Nonprofit Board members know the classic risk treatments: eliminate, mitigate, ignore. But is that all? The answer is an emphatic NO!. In fact, it just might be that the most important risk treatment is also the most ignored or forgotten. That special risk treatment is “embrace”.
Risk management is the management of future uncertainty – and the unknowns of the future are not all bad. (If you think the future only holds bad things, then I feel quite sorry for you.)
There are many unknowns that could turn out to be quite positive; a fund-raiser could go better than planned; a beneficiary of the non-profit may have an unusually good outcome that brings positive media attention to the organization; a new program created because of COVID disruptions may turn out to be more effective than the old pre-COVID program.
The point is that risk managing is managing so as to reduce the probability and severity of bad events happening, as well as managing so as to increase the probability and magnitude of good events occurring. In order to capture the upside, the risk management functions need to also include the
embracing of risk as a possible risk treatment (as well as the milder embellish of appropriate risks).
There are a host of benefits to making positive risk management part of your organization’s risk management thinking. Firstly, if only negative outcomes are management there will never be any value-added provided by the organization. You might say that that we are simply comingling opportunity with upside risk, but that brings us to a second benefit of also including upside risk as an integral part of risk management.
The second benefit is that the same techniques for identifying, assessing and managing downside risk can also be used for upside risk. Integration of upside and downside risk makes the risk management function both more efficient as well as more aligned with the mission and objectives of the organization. The third advantage of integrating upside risk management is that it makes for more balanced and positive risk culture.
Balancing the management of upside as well as downside risk makes the employees and volunteers of the organization more likely to buy into risk management practices and encourages them to become an active part of the risk management process.
So, the next time you start to consider possible risk management treatments, make sure you do not forget “embrace”.
It is the forgotten risk treatment, but it just might be the most important risk management tool.