Being focused is essential to achieving our objectives but is does not mean becoming ignorant to everything outside the boundaries of ones focus. Being focused may mean your focus is exceedingly mindful of all evolving possibilities.
When our focus is intentionally narrow it is relatively easy to avoid risk. We manage exactly what we need to manage and no more through risk aversion. Risk aversion has replaced or superseded risk management in just about every aspect of business.
Because it is easier or better?
Possibly, but not necessarily so.
Not only will I explain but I will also tell you how we can all return to risk management – back to where we really should be.
The real answer is because computer systems over the past twenty years have had far more influence than anyone has ever imagined.
Risk aversion is a relatively simple concept, easy to teach – simple to understand. The entire risk aversion theory is based on precisely defining the tasks involved, the rules to make it happen, and then outlining all the things necessary to resolve any issues that might arise should anything go wrong. The entire project lies within the confines of a pretty narrow but relatively safe box.
Most would argue that our practice of risk aversion is so intent to-day because of our new generation’s coming up behind us being self centered and uncaring. To which I say-hogwash! Who taught them the concepts of risk aversion anyway? Is it not the older generation who are guilty?
The biggest challenge to any resurgence in risk management is that risk aversion has become so popular that risk management has fallen out of favor in our education systems. And it has been for so long that it is not understood or appreciated as a valid management technique.
The spirit of risk management has been stiffed for so long that it no longer exists in most management circles. As a result we have lost the concept of deliberately accepting the challenges of what we think could become opportunities of high risk. Instead of choosing to try them, we reject, because we are not prepared for risk management – though the rewards could easily outweigh the risk factor.
If risk can be avoided through risk aversion, then of course, there is no risk. We enter into the activity, whatever it might be, knowing it will be relatively easy to manage, delivering an acceptable profit margin. The problem with risk aversion is that when opportunities sustained by risk management play out, there is nothing left to turn to.
Now, we are getting closer to the truth. Watch this!
The real reason is because we couldn’t manage it – for several reasons.
The first reason is because of a dependence on integrated modular ERP systems which tend to produce so much lag time between the event and being able to monitor the results. The negative results could produce a situation which cannot be terminated before a fortune is swept away.
Secondly, due to the modularity of most ERP systems, it is virtually impossible to test new opportunities with simplicity and ease.
As a result, it has been a lot easier to stick with status quo and shoot for volume with a mind-set that, if enough volume can be put through, one can bury a lot of unexplained costs. The terms efficiency and productivity are no longer understood. This is where risk aversion has worked so well and why it has become so predominant in North American industry. We have effectively shot ourselves in the foot.
I have told you why.
Now, here is the solution – The unERP. It is ERP financial software built for risk management. The unERP is engineered so that ERP Software Providers can readily become practising entrepreneurs, as well as their entire list of erp software clients. Entrepreneurship and risk management are essential for both rapid change as well as continued growth.
Businesses desperately need diversity, efficiency and productivity. We need to learn how to survive on flexible production volumes, even low ones. We must immediately and purposely return to risk management or else risk the future. Risk aversion will always have its place but it should be replaced with risk management and never again be allowed to become the dominant risk methodology.
Getting back to those younger people, it is essential for them to learn and practice risk management, far more critical than risk aversion. The older generation must help them get back on track before it is too late.
With high quality information and the right tools, they can do it.
They will not fail us.