Although they are do not necessarily accompany one another, risk is undoubtedly a common correlative to creativity and innovation. Indeed, concerns about risk are often a factor in resisting the development of creativity and innovation. Below is an outline of how to take calculated risks that facilitate creative and innovative thinking.
The first thing to do is acknowledge that there is risk in everything; even simply maintaining the status quo carries some risk. It’s incorrect to frame risk as an outcome exclusive to change; there is risk also in maintaining the status quo. In business landscapes increasingly characterised by ongoing and rapid change, not allowing for the possibility that the status quo can also carry risks means that you won’t be properly prepared if and when challenges eventuate. What’s more, misguidedly favouring the status quo because of its perceived reduced risk stifles creativity and innovation.
The second thing to acknowledge is that risk is nearly always better prepared for by widening the pool of voices of contributing to the discussion on risk management. A diversity of opinions, from a variety of backgrounds, identities, specialities, and positions within the organisation will help create a more holistic and considered risk management plan that still enables for creative and innovative thinking. Note that this doesn’t necessarily mean a greater number of voices should be involved in the final decision on the handling of a risk – greater numbers of people with the role of making the final call can simply complicate things.
With these two points in mind, below is an outline of how to take calculated risks.
Calculated and considered risk
To take a calculated risk you need to be across all the information relevant to your decision that is available to you, and also have an understanding of what still remains unknowable (the “known unknowns“).
This means understanding exactly what the risk involves from a logistical perspective: resource, time and staff implications as well as the market you are working in and it’s current trends.
Doing your due diligence will allow you to identify possible mistakes before they become fully-fledged problems, and develop informed risk management plans (discussed below).
Checkpoints and timelines
Set goals for yourself, your team or the organisation within clear timelines. This will encourage everyone to stay on track and will also allow for hiccoughs in the implementation of risk-heavy change to become clear earlier.
Be ready to change course
Acknowledge from the outset that not everything will go exactly as planned, and that having to change course is not an indication of the plan having failed, but simply a necessary component to most business plans. Being willing from the start to be flexible and return to the drawing board will save a lot of heartache.
Have a response plan
Risk mitigation is designed to reduce the likelihood and impact of a risk so that it sits within an acceptable threshold of risk. It is most often used for activities which have a high probability of occurring, but a relatively small financial impact.
Ways of implementing risk mitigation include establishing less complex processes, or adding more time, money or resources.
Risk transference involves passing on risk to a third party. This response is best suited to activities with a low likelihood of occurring, but which could have a large financial impact.
Methods of transference include: Purchasing insurance, warranties and guarantees; outsourcing; establishing partnerships or using fixed-price contracts that transfer the risk to the seller.
risk management is too often treated as a compliance issue that can be solved by drawing up lots of rules and making sure that all employees follow them.